The 49% fallacy

One of Governor Shumlin’s very favorite statistics is the 49% rise in the state’s portion of the Earned Income Tax Credit. He cites the magic number every time he talks about his proposed massive cut in the state’s EITC — from $25 million to $8 million, so he can boost child-care funding for working families by $17 million.

See, $17 million seems like a lot — but look: the EITC has gone up so rapidly that it’s not really a cut at all. It’s just a return to normalcy. Here he is, citing his favorite number in a recent opinion piece on VTDigger:

Our current EITC allocation is among the highest in the nation, and has risen 49 percent in the past eight years because it is federally indexed.

Problem: That number is technically accurate, but it’s grossly misleading. The individual benefit hasn’t risen by 49% — it’s the total cost of the program. And most of that increase isn’t due to federal indexing; it’s due to a rotten economy that’s driven more working people into poverty. So notes Jack Hoffman of the Public Assets Institute:

Much has been made of the 49 percent increase in the cost of EITC between 2003 and 2011. During that period, the number of people claiming the EITC increased by 27 percent. And in the last five years-from 2007 to 2012-real income for the bottom two quintiles has dropped. In other words, the cost of the EITC has increased because of a growing need, much of it driven by the Great Recession.

That remark comes from Hoffman’s testimony to a state House committee on January 29. And yet, Shumlin has gone on repeating his favorite number — “49%” falls from his lips almost as often as Rudy Giuliani says “9/11.”

And yet, no one in the media has pointed out this discrepancy. Nor have they challenged the Governor.

But wait, there’s more.

Let’s visit our old friend The Inflation Calculator and learn the difference between a 2003 dollar and the 2011 model.

Hmm. It says that what cost you a dollar in 2003 would cost you $1.22 in 2011. Well, that pretty much eats up the actual increase in an EITC credit, does it not? Indeed, when Shumlin uses the phrase “federally indexed,” what he means is that the EITC is adjusted with the inflation rate. If you don’t believe me, believe the IRS:

The income amounts and the amount of EITC are adjusted for inflation each year.

In other words, two factors are responsible for all, or virtually all, of that infamous 49% increase: the growing numbers of the working poor in Vermont, and the inflation rate. Nobody’s getting fat and happy off the EITC. The Governor insults the working poor, and our intelligence, by continually repeating that bogus 49% figure.

U mad yet? Read on.

Shumlin insists that his EITC raid is not a “cut” because the money is going into a child-care program that will help EITC recipients. They’re getting the same benefit, just in a more targeted way.

Er, no. We turn again to Hoffman’s January 29 testimony.

The proposal has been described as a “trade-off,” but it is difficult to see it that way. It raises income taxes on 44,000 poor working tax filers to expand a program that supports about 7,000 families.

And it gets worse:

…about two-thirds of the families in the child care program-about 4,000 families-now receive a 100 percent child care subsidy-because they are at or below 100 percent of the federal poverty level. …They don’t pay for child care now because they can’t afford to, and they won’t pay under the expansion. However, they will lose much of their EITC making these families poorer.

Governor Shumlin keeps on saying the same stuff about EITC and the expansion of child care. And it keeps on being untrue. I would hope that the Governor’s plans are solid enough, reasonable enough, that he wouldn’t have to mislead us to win our support.  

6 thoughts on “The 49% fallacy

  1. Talking points like the “49% increase” tend to go unchallenged largely because no one bothers to do the homework in a timely way.

    Once they’ve been repeated a sufficient number of times, they simply fall into the realm of accepted truisms and serve freely to validate all kinds of idiotic policies.

  2. Seriously – let them know that we know the game that’s being played. It’s time to stop eviscerating working people, while a few wealth hoarders are allowed to dance merrily into the sunset without ever being asked to contribute so much as a penny to the society that enabled their wealth.

  3. Thanks for this clarifying column.

    While both the EITC and the governor’s child care proposal are aimed at “the poor” and there is clearly some overlap, the sets of people affected by these two programs are not identical.  The EITC is granted on the basis of working and low-income. Presumably, at least some of the recipients are childless.  Conversely, I doubt all of those who would use the child care program are working outside the home, at least not as defined by the standards of the EITC.

    As your analysis points out, policy discussions deserve more attention to the details of the data.

  4. “…most of that increase isn’t due to federal indexing; it’s due to a rotten economy that’s driven more working people into poverty.”

    Shumlin’s false argument is 100% exactly the same as the far-right conservative’s on the national level decrying the huge increase in food stamps costs.  “These costs are out of control and have to be contained!”

    Neither Shumlin, nor his far-far-far right colleagues in Washington will ever tell the truth about the rise in these numbers, which jvwalt correctly points out is solely due to the Conservative’s intentional crashing of the global economy.

    Shumlin is taking the exact same path as his far-far-far-far-far right counterparts: cut off those that are desperately poor so that they become homeless and starve to death in order to make sure the insanely rich people won’t have to pay one thin dime in taxes (which they wouldn’t even notice was missing).

    Shumlin wants to make sure that a tiny number of obscenely wealthy Vermonters can afford their third solid-gold vacation house and a rocket-car, and he’s eager to kill off a much larger number of poor Vermonters to do just that – me being one of them.

  5. was most Democrats 2nd, 3rd, 4th or 5th choice to be governor in the 2010 primary, and it’s easy to see why.  He has more in common with the trust fund babies than with working VTers, and runs his government accordingly.



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