Taxes are one of the most important tools of public policy. Taxes shape the way each of us earns, saves, and spends money by rewarding some behaviors (owning a home, investing, going to school) and penalizing others (early withdrawals from retirement accounts). The amount of taxes collected affects the quality of services that the government is able to provide.
Reforming our tax system is critical to to progress toward economic justice and the elimination of poverty. Economics and justice both dictate that the poor should pay the lowest percentage of their income in taxes. A progressive tax system is good for everyone.
Although the federal income tax is broadly progressive, the tax system as a whole is tilted in favor of the rich and powerful:
Pennsylvania’s tax system is among the most regressive in the nation. While we all suffer for it, the poor suffer most.
One of the most effective ways of making the tax system more fair is through federal tax credits. We know first-hand how important tax credits like the Earned Income Tax Credit (EITC), Child Care Tax Credit, and American Opportunity Credit are for working people. Through our free tax preparation program, Just Harvest has helped thousands of low-income households file their tax returns since 2003. The EITC, for example, boosted the annual income of more than 1 in 6 of those households by at least 20%.
Currently, we are also supporting a federal expansion of the EITC for childless workers, and opposing a state sales tax on food and new corporate tax breaks at the state level.