Despite some challenging tax policy debates, a number of which hinged on states’ responses to federal conformity, 2018 brought some positive developments for workers and their families. This post updates a mid-session trends piece on this very subject. Here’s what we have been following:
Tax Credits for Workers and Families
State and local tax policies can often make it more difficult for low- and moderate-income individuals and families to make ends meet. Through the use of a variety of targeted tax credits, state lawmakers can help improve both the fairness of their tax systems as well as the standard of living for low- and moderate-income residents. ITEP resources on tax credits for workers and families provide general and state-specific information about the mechanics of these credits and options for reform including state Earned Income Tax Credits, property tax circuit breakers and child-related tax credits.
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blog July 10, 2018 Building on Momentum from Recent Years, 2018 Delivers Strengthened Tax Credits for Workers and Families
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blog March 26, 2018 Trends We’re Watching in 2018, Part 3: Improvements to Tax Credits for Workers and Families
This has been a big year for state action on tax credits that support low-and moderate-income workers and families. And this makes sense given the bad hand low- and middle-income families were dealt under the recent Trump-GOP tax law, which provides most of its benefits to high-income households and wealthy investors.
Many proposed changes are part of states’ broader reaction to the impact of the new federal law on state tax systems. Unfortunately, some of those proposals left much to be desired.
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blog September 15, 2017 Poverty is Down, But State Tax Codes Could Bring It Even Lower
The U.S. Census Bureau released its annual data on income, poverty and health insurance coverage this week. For the second consecutive year, the national poverty rate declined and the well-being of America’s most economically vulnerable has generally improved. In 2016, the year of the latest available data, 40.6 million (or nearly 1 in 8) Americans were living in poverty.
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report September 14, 2017 State Tax Codes as Poverty Fighting Tools
Astonishingly, tax policies in virtually every state make it harder for those living in poverty to make ends meet. When all the taxes imposed by state and local governments are taken into account, every state imposes higher effective tax rates on poor families than on the richest taxpayers.
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brief September 11, 2017 Reducing the Cost of Child Care Through State Tax Codes in 2017
Low- and middle-income working parents spend a significant portion of their income on child care. As the number of parents working outside of the home continues to rise, child care expenses have become an unavoidable and increasingly unaffordable expense. This policy brief examines state tax policy tools that can be used to make child care more affordable: a dependent care tax credit modeled after the federal program and a deduction for child care expenses.
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brief September 11, 2017 Property Tax Circuit Breakers in 2017
State lawmakers seeking to make residential property taxes more affordable have two broad options: across-the-board tax cuts for taxpayers at all income levels, such as a homestead exemption or a tax cap, and targeted tax breaks that are given only to particular groups of low- and middle-income taxpayers. One such targeted program to reduce property taxes is called a “circuit breaker” because it protects taxpayers from a property tax “overload” just like an electric circuit breaker: when a property tax bill exceeds a certain percentage of a taxpayer’s income, the circuit breaker reduces property taxes in excess of this “overload” level. This policy brief surveys the advantages and disadvantages of the circuit breaker approach to reducing property taxes.
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brief September 11, 2017 Options for a Less Regressive Sales Tax in 2017
Sales taxes are one of the most important revenue sources for state and local governments; however, they are also among the most unfair taxes, falling more heavily on low- and middle-income households. Therefore, it is important that policymakers nationwide find ways to make sales taxes more equitable while preserving this important source of funding for public services. This policy brief discusses two approaches to a less regressive sales tax: broad-based exemptions and targeted sales tax credits.
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brief September 11, 2017 Rewarding Work Through State Earned Income Tax Credits in 2017
The Earned Income Tax Credit (EITC) is a policy designed to bolster the earnings of low-wage workers and offset some of the taxes they pay, providing the opportunity for struggling families to step up and out of poverty toward meaningful economic security. The federal EITC has kept millions of Americans out of poverty since its enactment in the mid-1970s. Over the past several decades, the effectiveness of the EITC has been magnified as many states have enacted and later expanded their own credits.
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blog July 24, 2017 Sound Tax Policy Made a Comeback in 2017
2017 marked a sea change in state tax policy and a stark departure from the current federal tax debate as dubious supply-side economic theories began to lose their grip on… -
brief July 21, 2017 Rewarding Work Through State Earned Income Tax Credits
The Earned Income Tax Credit (EITC) is a policy designed to bolster the earnings of low-wage workers and offset some of the taxes they pay, providing the opportunity for struggling families to step up and out of poverty toward meaningful economic security. The federal EITC has kept millions of Americans out of poverty since its enactment in the mid-1970s. Over the past several decades, the effectiveness of the EITC has been magnified as many states have enacted and later expanded their own credits.
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blog May 23, 2017 Trump Budget Plan Would Eliminate Child Tax Credits for Working Families Due to Parents’ Immigration Status
As ITEP has detailed, undocumented immigrants are taxpayers, contributing close to $12 billion a year in state and local taxes while also paying federal payroll, income, and excise taxes. In spite of these facts, Mick Mulvaney, President Trump’s budget director, has spread erroneous information to validate the administration’s cruel proposal to strip a proven anti-poverty benefit from undocumented immigrants and their children.
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blog May 4, 2017 EITC Victories Await in Both Hawaii and Montana
Two states are on the verge of embracing a tried and tested anti-poverty policy, the Earned Income Tax Credit (EITC). In the past two weeks, lawmakers in both Hawaii and… -
blog March 24, 2017 What to Watch in the States: State Earned Income Tax Credits (EITC) on the Move
While every state’s tax system is regressive, meaning lower income people pay a higher tax rate than the rich, some states aim to improve tax fairness through a state Earned… -
report September 15, 2016 State Tax Codes as Poverty Fighting Tools
Despite this unlevel playing field states create for their poorest residents through existing policies, many state policymakers have proposed (and in some cases enacted) tax increases on the poor under the guise of “tax reform,” often to finance tax cuts for their wealthiest residents and profitable corporations.
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brief September 14, 2016 Property Tax Circuit Breakers
State lawmakers seeking to make residential property taxes more affordable have two broad options: across-the-board tax cuts for taxpayers at all income levels, such as a homestead exemption or a tax cap, and targeted tax breaks that are given only to particular groups of low- and middle-income taxpayers. One such targeted program to reduce property taxes is called a “circuit breaker” because it protects taxpayers from a property tax “overload” just like an electric circuit breaker: when a property tax bill exceeds a certain percentage of a taxpayer’s income, the circuit breaker reduces property taxes in excess of this “overload” level. This policy brief surveys the advantages and disadvantages of the circuit breaker approach to reducing property taxes.
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brief September 14, 2016 Reducing the Cost of Child Care Through State Tax Codes
Low- and middle-income working parents spend a significant portion of their income on child care. As the number of parents working outside of the home continues to rise, child care expenses have become an unavoidable and increasingly unaffordable expense. This policy brief examines state tax policy tools that can be used to make child care more affordable: a dependent care tax credit modeled after the federal program and a deduction for child care expenses.
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brief September 14, 2016 Rewarding Work Through State Earned Income Tax Credits
The Earned Income Tax Credit (EITC) is a policy designed to bolster the earnings of low-wage workers and offset some of the taxes they pay, providing the opportunity for struggling families to step up and out of poverty toward meaningful economic security. The federal EITC has kept millions of Americans out of poverty since its enactment in the mid-1970s. Over the past several decades, the effectiveness of the EITC has been magnified as many states have enacted and later expanded their own credits.
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brief February 11, 2016 Rewarding Work Through State Earned Income Tax Credits
See the 2016 Updated Brief Here Read the brief in a PDF here. that time, the EITC has been improved to lift and keep more working families out of poverty.… -
report September 17, 2015 State Tax Codes As Poverty Fighting Tools
The U.S. Census Bureau released data in September showing that the share of Americans living in poverty remains high. In 2014, the national poverty rate was 14.8 percent – statistically unchanged from the previous year. However, the poverty rate remains 2.3 percentage points higher than it was in 2007, before the Great Recession, indicating that recent economic gains have not yet reached all households and that there is much room for improvement. The 2014 measure translates to more than 46.7 million – more than 1 in 7 – Americans living in poverty. Most state poverty rates also held steady between 2013 and 2014 though twelve states experienced a decline.
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brief September 17, 2015 Rewarding Work Through State Earned Income Tax Credits
Despite some economic gains in recent years, the number of Americans living in poverty has held steady over the past four years. At the same time, wages for working families have remained stagnant and more than half of the jobs created by the economic recovery since 2010 were low-paying, mostly in the food services, retail, and employment services industries. Our country’s growing class of low-wage workers often faces a dual challenge as they struggle to make ends meet. First, wages are too low and growing too slowly – despite recent productivity gains – to keep up with the rising cost of food, housing, child care, and other household expenses. At the same time, the poor are often saddled with highly regressive state and local taxes, making it even harder for low-wage workers to move out of poverty and achieve meaningful economic security. The Earned Income Tax Credit (EITC) is designed to help low-wage workers meet both those challenges.
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report September 18, 2014 State Tax Codes As Poverty Fighting Tools
Read the Report in PDF Form The Census Bureau released data in September showing that the share of Americans living in poverty remains high. In 2013, the national poverty rate… -
report May 15, 2014 Improving Tax Fairness with a State Earned Income Tax Credit
The simplest, most effective, and most targeted way to begin to counteract regressive state tax codes is a refundable state Earned Income Tax Credit (EITC). Twenty-five states and the District of Columbia already have some version of a state EITC. Each one is modeled on the federal credit, making it easy for taxpayers to claim and simple for state tax officials to administer. This report explains how all states – even those who already have some form of the credit – can use the state EITC as a tool for improving the fairness of their state tax code.
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report September 19, 2013 State Tax Codes As Poverty Fighting Tools
New Census Bureau data released this month show that the share of Americans living in poverty remains high, despite other signs of economic recovery. The national 2012 poverty rate of 15 percent is essentially unchanged since 2010 , but still 2.5 percentage points higher than pre-recession levels. This means that in 2012, 46.5 million, or about 1 in 6 Americans, lived in poverty.1 The poverty rate in most states also held steady with five states experiencing an increase in either the number or share of residents living in poverty while only two states saw a decline.2
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report September 13, 2012 State Tax Codes As Poverty Fighting Tools
The tax systems of virtually every state are pushing poor families deeper into poverty. But state tax systems also have the potential to play a role in fighting poverty. The four low-income tax credits discussed in this report are among the most cost-effective anti-poverty strategies available to lawmakers: the Earned Income Tax Credit, property tax circuit breakers, targeted low-income tax credits, and child-related tax credits. This report identifies the states in which each of these credits is offered, and provides specific recommendations tailored to policymakers in each state as they work to combat poverty.
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brief September 1, 2011 Rewarding Work Through Earned Income Tax Credits
Low-wage workers often face a dual challenge as they struggle to make ends meet. In many instances, the wages they earn are insufficient to encourage additional hours of work or long-term attachment to the labor force. At the same time, most state and local tax systems impose greater responsibilities on poor families than on wealthy ones, making it even harder for low-wage workers to move above the poverty line and achieve meaningful economic security. The Earned Income Tax Credit (EITC) is designed to help low-wage workers meet both those challenges. This policy brief explains how the credit works at the federal level and what policymakers can do to build upon it at the state level.