Ohio experiments with earned-income tax credit increases

Something of an experiment in conservative economics is underway in Ohio. Both Gov. John Kasich and state legislators deserve enormous credit for engaging in it.

At its core, however, the initiative is intended to help Ohioans struggling to make ends meet. That is anything but an experiment.

Among many items in a budget revision enacted this summer is one doubling the state’s relatively new earned-income tax credit. It is patterned after the federal tax break with the same name.

Earned-income tax credits help people who are working but taking home small paychecks. They make it easier for those who qualify to make ends meet without turning to public assistance. Advocates of the credits say children in low-income families are big winners in the arrangement.

Ohio’s credit had been set at 5 percent of the federal amount. Under the budget revision, that will be doubled, providing a substantial boost to earned-income tax credit claimants.

So the change, viewed solely as one to assist low-income Buckeye State residents, is a good thing.

But it is expected to have a beneficial side-effect. Proponents of the initiative hope it will encourage more Ohioans to get off the welfare rolls by taking jobs, even at relatively low wages. The credit will be an incentive for them.

There is evidence such tax incentives work.

But precisely how well it will work in Ohio is uncertain. In other words, the change is an experiment in that it should give state officials data on how many people and families see the credit as enough incentive to get off welfare by finding jobs.

During the next year, the state should monitor the initiative in an effort to obtain hard data. If it develops that the incentive works well, it may be that Kasich and lawmakers should consider increasing it even more. Forgoing some state income tax revenue in exchange for reducing reliance on public assistance would be an excellent trade.