Improving Tax Fairness with a State Earned Income Tax Credit

Read our 2015 EITC policy brief here

Virtually every state’s tax system is fundamentally unfair, requiring a much greater share of income from middle- and low-income families than from wealthy families. Nationwide, low-income Americans (those making less than $18,000 a year, putting them in the bottom 20% of the nationwide income distribution) pay an average effective state and local tax rate roughly double (11.1%) that paid by the top one percent (5.6%). This means that state tax systems push the poor even further into poverty and exacerbate income inequality.

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.

Click on a state to below to see a state specific fact sheet. (PDF)

Alabama Hawaii Michigan North Carolina Utah
Alaska Idaho Minnesota North Dakota Vermont
Arizona Illinois Mississippi Ohio Virginia
Arkansas Indiana Missouri Oklahoma Washington
California Iowa Montana Oregon West Virginia
Colorado Kansas Nebraska Pennsylvania Wisconsin
Connecticut Kentucky Nevada Rhode Island Wyoming
Delaware Louisiana New Hampshire South Carolina  
District of Columbia Maine New Jersey South Dakota  
Florida Maryland New Mexico Tennessee  
Georgia Massachusetts New York Texas