Georgia Can Honor Dr. King's Legacy with a Simple Change to its Tax Code

By Charles S. Johnson

Much attention is currently focused on the events which occurred fifty years ago, the last year in the life of Dr. of Martin Luther King, Jr. In the course of this year’s many commemorations, too little attention is focused on the causes to which he devoted his final year. There is a tendency to forget that, at the end of his life, Dr. King’s central message concerned the need for economic justice.

The rapid economic expansion which the United States experienced in the 1960s was not shared by all Americans. Throughout that decade, despite the gains brought about by the Civil Rights Movement, the rate of poverty among African-Americans remained at three times the rate experienced by white Americans.

By 1967, Dr. King had concluded that the Movement’s focus should expand from an emphasis on civil rights to a broader emphasis on human rights: that African Americans and other disinherited citizens would never achieve full citizenship until they attained economic security and, accordingly, that something must be done to focus the nation’s attention on the problems of poverty and economic inequality. 

Toward the end of 1967, Dr. King announced his intention to lead a Poor People’s Campaign the following year.  His plan was for thousands of poor people of all races and backgrounds to descend on the nation’s capital, to demand that government officials address the needs of the nation’s poor.

Dr. King spent the early months of 1968 traveling around the country, generating support for the Poor People’s Campaign. To illustrate the plight of the working poor, he embraced the struggle of the sanitation workers in the City of Memphis who were currently striking to demand better pay and working conditions.

The central demands of the Poor People’s Campaign were summarized in an “Economic Bill of Rights,” notably including the right to a meaningful job with a livable wage. In this most prosperous nation on earth, participants in the Poor People’s Campaign called on the nation to embrace a guaranteed annual income.

In the weeks following Dr. King’s death, a Committee of 100 began meeting with members of Congress and leaders of executive agencies to lobby for the Campaign’s demands.  By May, thousands of the nation’s poor had begun to assemble in an encampment on the National Mall referred to as Resurrection City, and they began a series of demonstrations in support of the Economic Bill of Rights. 

By the end of June, the inhabitants of Resurrection City had been evicted. Many of them continued to lobby for changes in federal policy, with modest results. Others went on to demonstrate at the Democratic and Republican conventions later that summer.

But the idea of supplementing the income of the nation’s poor, so prominently featured in the Economic Bill of Rights, did not die with the evacuation of Resurrection City. In one form or another, the idea continued to be discussed among policymakers at the highest level.

The year 1968 culminated with the election of President Richard Nixon and a renewed emphasis on economic approaches that were seen as conservative.  While many conservative leaders recoiled at the idea of subsidizing the idle poor, many of them began to embrace the idea of finding a way to assist the working poor.  A major concern arose as to the best way to encourage poor people to enter and remain in the workforce and thus reduce the number of families needing what was then referred to as Aid to Families with Dependent Children (“AFDC”). Some policymakers began to entertain the idea of a negative income tax, under which people with low incomes would receive money back from the government instead of paying taxes to the government.

Conservative economist Milton Friedman had proposed a negative income tax as a replacement for traditional welfare: giving to poor people cash which they could use as they saw fit, rather than giving them an array of welfare benefits. Friedman believed that such an approach would introduce a new level of simplicity, since it would be administered centrally by the IRS instead of many different organizations. Friedman’s approach included the introduction of new lower but graduated tax rates, such that taxpayers would lose benefits as their income rose, but they would always come out ahead with a higher earned income.

In 1971 President Nixon proposed a “Family Assistance Plan” welfare reform program including a negative income tax, guaranteeing money to families with children, with assistance payments declining as a function of earnings. Although Congress declined to adopt this measure, policymakers continued to experiment with a variety of tax-driven approaches to income maintenance.  Senator Russell Long proposed a “work bonus” plan to supplement the wages of poor workers.

The Tax Reduction Act of 1975 introduced a “work bonus” plan but renamed it the Earned Income Tax Credit (“EITC), a temporary refundable tax credit for lower-income workers to offset the Social Security payroll tax and rising food costs. The EITC was made permanent in the Revenue Act of 1978.

The EITC is now seen by many as both an anti-poverty program and an alternative to welfare, because it incentivizes work. President Reagan described it as “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”

Recognizing that state and local taxes continue to disproportionately burden individuals with low and moderate income, twenty-nine states and the District of Columbia have adopted some form of EITC, generally by matching the federal credit. These state credits provide a modest yet critical boost for taxpayers who already receive the federal EITC. State EITCs are typically claimed as a percentage of the federal credit’s value, ranging from a low of 3 percent in Montana to a high of 40 percent in Washington, D.C. Hawaii, Montana and South Carolina each enacted new EITCs in 2017.

The concept of an EITC has much in common with the proposals advanced by Dr. King in the last year of his life.  In fact, the EITC improves on Dr. King’s proposal of a guaranteed annual income by directly encouraging workforce participation. Georgia, the home of Martin Luther King, is among the states that do not provide a state match to the federal EITC. By enacting its own EITC, Georgia can provide much-needed support for working families while honoring the legacy of one its prominent native sons.