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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.

The broadly outlined tax proposals released by the Trump administration would not benefit all taxpayers equally and they would not benefit all states equally either. Several states would receive a share of the total resulting tax cuts that is less than their share of the U.S. population. Of the dozen states receiving the least by this measure, seven are in the South. The others are New Mexico, Oregon, Maine, Idaho and Hawaii.

This letter outlines ITEP’s two broad objectives for meaningful federal tax reform and discusses six recommendations that would achieve them.

Sales taxes are an important revenue source, composing close to half of all state tax revenues. But sales taxes are also inherently regressive because the lower a family’s income, the more the family must spend on goods and services subject to the tax. Lawmakers in many states have enacted “sales tax holidays” (at least 16 states will hold them in 2017), to provide a temporary break on paying the tax on purchases of clothing, school supplies, and other items. While these holidays may seem to lessen the regressive impacts of the sales tax, their benefits are minimal. This policy brief looks at sales tax holidays as a tax reduction device.

The Trump Administration recently released its proposed budget for Fiscal Year 2018. The administration claims that its proposals would reduce the deficit in nearly every year over the next decade before eventually achieving a balanced budget in 2027, but the assumptions it uses to reach this conclusion are deeply flawed. This report explains these flaws and their consequences for the debate over major federal tax changes.

Many state governments are struggling to repair and expand their transportation infrastructure because they are attempting to cover the rising cost of asphalt, machinery, and other construction materials with fixed-rate gasoline taxes that are rarely increased.

The flawed design of federal and state gasoline taxes has made it exceedingly difficult to raise adequate funds to maintain the nation’s transportation infrastructure. Thirty states and the federal government levy fixed-rate gas taxes where the tax rate does not change even when the cost of infrastructure materials rises or when drivers transition toward more fuel-efficient vehicles and pay less in gas tax. The federal government’s 18.4 cent gas tax, for example, has not increased in over twenty-three years. Likewise, nineteen states have waited a decade or more since last raising their own gas tax rates.

One of the most important functions of government is to maintain a high-quality public education system. In many states, however, this objective is being undermined by tax policies that redirect public dollars for K-12 education toward private schools.

For years, a subset of the well-to-do and well-connected have been able to exploit the intricacies of our global financial system to shelter their income and investments from taxation. The U.S. government took a stand against this type of willful tax evasion with the passage of the Foreign Account Tax Compliance Act – or FATCA – enacted as part of the Hiring Incentives to Restore Employment (HIRE) Act of 2010.

With many states currently facing budget shortfalls—whether due to weak economic recovery after the Great Recession, struggling commodity prices, or self-inflicted tax cuts—and all states bracing for possible federal budget cuts in areas from education to health care to infrastructure, states are unlikely to be able to continue providing high-quality services to their residents without raising new revenue. In this context, states must find ways to generate additional revenue without increasing taxes on individuals and families who are already struggling to make ends meet and may bear the biggest brunt of federal funding cuts.