In researching my RIA materials this morning, I learned that MA Governor Charlie Baker signed into law a bill that increased the MA earned income credit from 15% (of the Federal amount) to 23%.
From a bipartisan standpoint, everyone should be surprised that a Republican Governor signed this. And here is why…
First, the IRS website states that 21% to 26% percent of earned income credits are paid in error. That is putting it mildly, as it’s under the caption “Fraud.” http://www.eitc.irs.gov/Tax-Preparer-Toolkit/faqs/fraud
Second, that is an increase in the credit of over 50%.
As a Massachusetts Taxpayer, I am a little surprised to see this. In 2013, $833,000,000 was paid out in the Commonwealth for the earned income credit. By the way, that means that over $5 billion was paid to Massachusetts recipients alone at the Federal level ($833,000,000/15%). Well, with this bill that Massachusetts budget hit will increase to just under $1.3 billion dollars.
If that isn’t sobering enough, how about this: If the IRS themselves state that 26% of earned income credits are fraudulent, $330,000,000 will be paid out fraudulently in the Commonwealth, based upon this increase. Put another way, with a stroke of the pen, the Governor signed into law a bill that just completely and utterly wasted $330,000,000 dollars.
Embarrassing for me to say, but I did not see this coming.