NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7486
TITLE OF BILL: An act to amend the tax law, in relation to install-
ment payment for the earned income credit
PURPOSE OR GENERAL IDEA OF THE BILL: The purpose of this legislation
is to require that the earned income tax credit be paid in monthly
installments to avoid binge spending and to facilitate the development
of a regular monthly budget leading to fewer financial emergencies for
the working poor.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 of the bill amends section 686 of the Tax Law by adding a new
subsection (d) to require that earned income tax credits that exceed
$200 be paid in monthly installments of at least $200.
Section 2 of the bill would make the bill effective 120 days after it
becomes law, and would empower the commissioner of taxation and finance
to promulgate regulations necessary for its implementation.
JUSTIFICATION: Under current law, working poor are entitled to an
earned income tax credit (EITC), which is a direct payment from the
State of New York that supplements their prior income. The EITC is in
addition to any tax refund, and acts in the same manner as a negative
income tax that pays the working poor more in a "refund" than they paid
in taxes. The EITC is paid in a lump sum in the same check as any regu-
lar tax refund.
Because the EITC is paid in a lump sum, it can encourage binge spending
on nonessential amenities. For example, according to a 2009 consumption
survey by the U.S. Department of Energy, one-third of those in poverty
have a wide-screen plasma or LCD TV, one-third have more than one vehi-
cle, one in seven have two or more computers, and more than half have
video game systems.
This bill would required the EITC to be paid in monthly installments,
thus reducing its use for nonessential big-ticket items, encouraging
responsible monthly budgeting, and making more funds available on a
monthly basis for basic expenses. More responsible budgeting will assist
the working poor in having the financial resources available on a month-
ly basis to meet reoccurring expenses, will reduce the incidence of
financial emergencies, and will assist in the successful transition to
full independence. The regular tax refund would still be paid in a lump
PRIOR LEGISLATIVE HISTORY: New bill.
FISCAL IMPLICATIONS: The bill would result in lower government
expenditures for emergency financial assistance (such as emergency HEAP
or other emergency financial assistance) by increasing the effective
monthly income of the working poor.
EFFECTIVE DATE: The bill would become effective 120 days after enact-