A growing group of state lawmakers are recognizing the extent to which low- and middle-income Americans are struggling and the ways in which their state and local tax systems can do more to ensure the economic security of their residents over the long run. To that end, lawmakers across the country have made strides in enacting, increasing, or expanding tax credits that benefit low- and middle-income families. Here is a summary of those changes and a celebration of those successes.
State Policy
State taxes pay for essential public services, from education to health care. But the ideal design of a tax system is complicated. ITEP’s state policy resources offer insights into central issues, including the impact of state tax systems on individuals, families, and businesses. Its work also analyzes the sustainability of revenue sources over time.
ITEP's State Policy Research Priorities
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blog June 28, 2021 State-Level EITC Victories in 2021
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blog June 24, 2021 State Rundown 6/24: Late June State Fiscal Debates Unusually Active
Delayed legislative sessions and protracted federal aid debates have made for a busier June than normal for state fiscal debates. Arizona, New Hampshire, and North Carolina legislators, for example, are still pushing for expensive and regressive tax cuts in their states while they remain in session…
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brief June 17, 2021 ITIN Filer Data Gap: How Changing Laws, Lack of Data Disaggregation Limit Inclusive Tax Policy
Like U.S. citizens, noncitizens who live, work, or invest in the United States must file local, state and federal taxes. But in order to file personal income taxes, they must first be issued a processing number called an Individual Taxpayer Identification Number (ITIN) by the IRS. These numbers are issued to both legal permanent residents and nonresidents who are not eligible for Social Security numbers. ITINs do not imply immigration status, nor can they be used for immigration enforcement purposes, but they can be used to create burdensome barriers that make it difficult for ITIN holders to file taxes and to impose additional eligibility restrictions on benefits that exclude ITIN filers. The time is now to focus on integrating all ITIN filers, regardless of immigration status, into our tax policies. But a lack of information on the ITIN population creates large gaps in our understanding of these filers and the role they play in the U.S. tax system.
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blog June 16, 2021 State Rundown 6/16: Progressive Tax Policy Keeps Racking Up Wins
Taxing rich households and large corporations to fund vital investments in education and other shared priorities has long been a winner in the eyes of the American public, and more recently has also enjoyed a string of victories in state legislatures and at the ballot box. That win streak continued this week as Arizona’s voter-approved tax surcharge on the rich and Seattle, Washington’s payroll tax on high-profit, high-salary businesses both survived court challenges, and Massachusetts leaders approved a millionaires tax to go before voters next year.
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blog June 7, 2021 State Rundown 6/7: Remaining State Legislative Sessions Are Heating up as Budget Deadlines Loom
Just as an early summer heatwave brought soaring temperatures this past weekend through much of the lower 48 states, several state legislative sessions are heating up as legislators scramble to make tough budget decisions. Massachusetts lawmakers are voting on a fiery new “millionaires’ tax” that would support transportation and education revenue needs, and Connecticut will likely restore its state Earned Income Tax Credit (EITC) back to 30 percent. Illinois’s decision to cut back corporate tax breaks also provided a breath of fresh air. Unfortunately, we’d give other state tax proposals a more lukewarm reception: New Hampshire, North Carolina, and Ohio are all considering tax cuts that would either primarily benefit the wealthy or create unsustainable revenue shortfalls. But it’s not too late to cool it and adopt more responsible and equitable tax policies.
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blog May 27, 2021 State Rundown 5/27: State Legislatures Step Back, Advocates Push Forward
As more and more state legislatures wrap up their sessions and we reflect on the whirlwind that is this past year, it’s easy to focus on the steps back that states like Oklahoma have taken and Nebraska, North Carolina, and Arizona are trying to take. We have had some significant wins in states over the course of the year, but not every development will be a good one. However, we know advocates are on the ground, working tirelessly to help states maintain equity and progressivity in their tax codes. And for that, we have many of you—our intrepid readers of the Rundown—to thank. So, thank you, we can’t wait to continue to press on together.
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blog May 20, 2021 State Rundown 5/20: You Learn Something New Every Tax Day
“Tax Day” was earlier this week but the debates, research, and advocacy that determine our taxes and how they are used take place every day of the year…
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blog May 17, 2021 State and Local Lessons on Tax Day 2021
Much like every day is Mother’s Day or Father’s Day, when you’re a tax institute, every day is truly Tax Day. But for the rest of America, with Tax Day… -
blog May 13, 2021 State Rundown 5/13: States Get Federal Aid and Guidance as Many Sessions Wind Down
We had our noses buried in new American Rescue Plan guidance…when we heard the refreshing news that Missouri leaders are on the verge of modernizing their tax code, not only by becoming the final state to apply sales taxes to online purchases, but also by enacting an Earned Income Tax Credit (EITC)…Meanwhile, tax debates are also highly active in California, Colorado, Louisiana, Maine, and Nebraska. We also share some of our own reporting on recent efforts in Arizona and several other states to undermine voter-approved reforms and democratic institutions themselves.
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blog May 13, 2021 Nearly 20 Million Will Benefit if Congress Makes the EITC Enhancement Permanent
Overall, the EITC enhancement would provide a $12.4 billion boost in 2022 if made permanent, benefiting 19.5 million workers. It would have a particularly meaningful impact on the bottom 20 percent of eligible households who would receive more than three-fourths of the total benefit. Forty-one percent of households in the bottom 20 percent of earners would benefit, receiving an average income boost of 6.3 percent, or $740 dollars.
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blog May 12, 2021 Arizonans Voted to Tax the Rich. Now Lawmakers Want to Undo Most of That.
In 2018, Arizona teachers took part in a national wave of teacher walkouts, protesting inadequate education funding and some of the lowest teacher pay in the nation—direct results of the state’s penchant for deep tax cuts and its decision to levy some of the lowest tax rates in the country on high-income families.
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blog May 6, 2021 State Rundown 5/6: April Showers Bring Weeds As Well As Flowers
This week’s state fiscal news brings a reminder that even though advocates for great economic and racial justice have won some major progressive victories recently, anti-tax zealots have been hard… -
blog April 29, 2021 State Rundown 4/29: How You Like Them Washington Apples?
North Carolina lawmakers may have approved a massive tax subsidy giveaway to Apple, but we won’t let that news spoil our barrel this week. Nor will we be discouraged by Connecticut Gov. Ned Lamont’s threats to upset the apple cart full of positive progressive tax reforms state lawmakers recently came together to approve…Why all the optimism? Because the apple of our eye this week is Washington State, where advocates and lawmakers succeeded in a decade-long fight…
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blog April 27, 2021 Gentrification and the Property Tax: How Circuit Breakers Can Help
Property tax circuit breakers are effective because they provide property tax relief to families whose property taxes surpass a certain percentage of their income. If a family in a gentrifying area sees their property tax bill (or their rent) surge to an unaffordable level, a circuit breaker credit kicks in to offer relief. This targeted approach assists low- and middle-income families without significantly reducing overall tax revenue.
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blog April 27, 2021 Bold Progressive State Tax Victories Provide Bright Spots in Difficult Year
“Bold progressive victories” is probably not the first phrase that comes to mind when thinking about state laws enacted so far in 2021…But progressive advocates, lawmakers, and voters have won some tremendous victories in states recently…We should celebrate them for the achievements they are—and closely study them for lessons they can teach about how to bring about positive progressive change in these and other states.
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blog April 27, 2021 Inclusive Child Tax Credit Reform Would Restore Benefit to 1 Million Young ‘Dreamers’
As the Biden administration maps out the next steps in America’s response to the coronavirus pandemic—through what is now being called the American Families Plan—it should make sure a proposed expansion of the Child Tax Credit (CTC) includes undocumented children who have largely been left out of federal relief packages this past year. Prior to 2017 Tax Cut and Jobs Act, all children regardless of their immigration status received the credit as long as their parents met the income eligibility requirements. This change essentially excluded around 1 million children and their families.
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blog April 21, 2021 State Rundown 4/21: Spring Has Sprung, or Has It?
Just as a recent cold snap reminded us that spring has not fully sprung yet, this week’s news has been full of reminders that state fiscal debates aren’t quite finished either…
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blog April 21, 2021 An EITC to Lift Up Young Workers
Young workers are confronting a harsh economic reality filled with student loan debt and far too few good-paying jobs. The pandemic reinforced this group’s long history of not receiving proper benefits, such as health insurance, from their employers. They also are often overlooked when it comes to policies that promote economic wellbeing. The federal Earned Income Tax Credit (EITC), for example, is a glowing success story. It lifted 5.8 million people out of poverty in 2018, including 3 million children. But a key shortcoming of the federal EITC: working adults without children in the home receive little to no benefit.
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blog April 14, 2021 State Rundown 4/14: More Progressive Wins in the Headlines this Week, but Mind the Fine Print
Two significant victories headlined state tax debates in the past week, as New Mexico leaders improved existing targeted tax credits to give bigger boosts and reach more families in need, and West Virginia lawmakers unanimously shut down a destructive effort to eliminate the state’s progressive income tax. These developments follow last week’s major wins for progressive taxation and targeted assistance in New York, and more good news is likely soon as Washington legislators continue to advance their own targeted credit for working families. Not all the news is positive though, as costly and/or regressive tax cuts remain on the table in states including Florida, Iowa, Ohio, and others.
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blog April 7, 2021 State Rundown 4/7: Tax Justice Advocates Applaud New York Budget Deal
New York lawmakers stole the spotlight this week as they were able to agree on—and convince reluctant Gov. Andrew Cuomo to support—strong progressive tax increases on the highest-income households and corporations in the state to fund shared priorities like K-12 education and pandemic recovery efforts. Minnesota leaders are attempting a similar performance off Broadway with progressive reforms of their own, while Kansas legislators are getting poor reviews for cutting a number of taxes and worsening their budget situation. Thankfully major tax changes stayed backstage as sessions concluded in Georgia and Mississippi.
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blog April 1, 2021 State Rundown 4/1: Most States Resisting Foolish Tax Cut Games That Tear Revenues Apart
Supporters of tax fairness and adequate funding for public needs are hoping West Virginia’s income tax elimination effort turns out to be a prank, but most states are not fooling around with such harmful policies this year. For example…
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blog March 31, 2021 A New Look at Taxes and Race at the State and Local Levels
A new ITEP report reveals how different taxes have very different impacts on racial equity and unveils data for two states showcasing the consequences of their contrasting tax policy choices. In short, we find that income taxes can help narrow the racial income and wealth divides while sales taxes generally make those divides worse.
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report March 31, 2021 Taxes and Racial Equity: An Overview of State and Local Policy Impacts
Historic and current injustices, both in public policy and in broader society, have resulted in vast disparities in income and wealth across race and ethnicity. Employment discrimination has denied good job opportunities to people of color. An uneven system of public education funding advantages wealthier white people and produces unequal educational outcomes. Racist policies such as redlining and discrimination in lending practices have denied countless Black families the opportunity to become homeowners or business owners, creating extraordinary differences in intergenerational wealth. These inequities have long-lasting effects that compound over time.
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blog March 24, 2021 State Rundown 3/24: The Calm Before the Reform?
It was a relatively quiet week in state fiscal policy, likely partly due to states waiting for federal guidance on some of the details in the American Rescue Plan. As they await those details, lawmakers in Mississippi and West Virginia continue to wrangle over whether to recklessly eliminate their income taxes, while leaders in states including Connecticut and New York considered more productive and progressive reforms. And in the meantime, groundbreaking work on the intersection of race and tax policy is now available.
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blog March 17, 2021 State Rundown 3/17: Momentum for Sound Progressive Tax Reforms Continues to Build
We wrote last week that the inclusion of fiscal relief for states and localities in Congress’s American Rescue Plan should free up state lawmakers’ time and attention to focus on the comprehensive reforms needed to address upside-down and inadequate tax codes, and some states are already doing just that.