Tax Credits for Workers and Families

Nearly two-thirds of states (plus the District of Columbia and Puerto Rico) have an Earned Income Tax Credit. These credits boost low-paid workers’ incomes and offset some of the taxes they pay, helping working class families achieve greater economic security.

Sixteen states provide Child Tax Credits to reduce poverty, boost economic security, and invest in children. State lawmakers have several options to maximize the impact of Child Tax Credits.

Since 2021, there has been a flurry of new and expanded state Child Tax Credits and Earned Income Tax Credits. This continued momentum speaks to the power and popularity of these credits and the need to boost the financial security of families and children across the country.

Today the Trump administration proposed new regulations seeking to drastically reduce the tax credits that certain immigrant tax filers can claim. The affected credits include the Earned Income Tax Credit (EITC), Additional Child Tax Credit, American Opportunity Tax Credit, and the Adoption Tax Credit. 

In a year of cautious uncertainty around current and ongoing revenues, many state lawmakers strengthened their tax credits for families and children.

It's the first official week of summer, and while many of us are planning vacations, state lawmakers remain busy finalizing and debating tax proposals.

The spending plan, signed into law by Gov. Dan McKee today, features a new millionaires’ tax, the state’s first permanent child tax credit, expanded eligibility for its Social Security exemption , and strategic decoupling from federal business tax provisions.

As we head into summer, many state legislatures are in the final stretches of their sessions. Rhode Island moved another step closer to joining the ranks of Washington, Maine, and Hawai’i in enacting a new high-income surcharge this year.

A veritable superbloom of tax and budget policies occurred over these last few weeks, including both flowers worth admiring and weeds worth fighting back.

A new proposal in Congress to expand the Earned Income Tax Credit (EITC) would help families with the costs of raising children. The Working Parents Tax Relief Act is one of the latest approaches to help working-class families deal with an ongoing affordability crisis.

Sen. Chris Van Hollen has recently introduced the Working Americans’ Tax Cut Act, which offers a generous middle-class tax cut paid for with a new tax on millionaires.

The Washington legislature has approved a new "millionaires' tax," a 9.9 percent tax on income over $1 million. The bill, which makes significant investments in public education and child care, will also expand the Working Families Tax Credit – the state’s EITC – to reach an additional 460,000 households.

The 2025 Trump tax law slightly increased the Child Tax Credit in a way that benefits virtually none of the children who most need help.

By decoupling from three misguided federal corporate income tax cuts under the One Big Beautiful Bill, plus taking steps to curb unfair corporate tax avoidance, SB 151 would raise and safeguard more than $120 million annually.

State lawmakers are grappling with a range of challenges as their fiscal outlooks deteriorate, federal tax enforcement wanes (after the Trump administration cut the IRS workforce by 25 percent), and a rewritten federal tax code sends states scrambling to decide what changes they might want to make in their own codes.

While some may be excited for a romantic Valentine’s Day this weekend, many state lawmakers are breaking up and decoupling from recent federal tax changes that are poised to leave states with revenue shortfalls – much like a bad date who forgets their wallet and asks you to pick up the tab.

The results are a mixed bag, with some states enacting promising policies that will improve tax equity and others going in the opposite direction.

Federal lawmakers passed a bill along party lines that would force the District of Columbia to override the decision of local elected officials and implement all of the costly and inequitable federal tax cuts passed under the “One Big Beautiful Bill Act” (OBBBA).

Most states are adopting a very cautious approach so far this year as legislators begin their sessions and governors make their annual addresses, thanks to ongoing economic uncertainty and federal retrenchment.

In the same way states are building upon federal tax credits, localities should consider building on state tax credits.

Many states already recognize the potential of these credits to boost low- and moderate-income households. Other states should follow suit.

Local governments have a critical role to play in reducing child poverty. Local Child Tax Credits could provide large tax cuts to families at the bottom of the income scale, lessening the overall regressivity of state and local tax systems.

Nearly two-thirds of states now have an Earned Income Tax Credit (EITC). Momentum continues to build on these credits that boost low-paid workers’ incomes and offset some of the taxes they pay, helping lower-income families achieve greater economic security.

Child Tax Credits (CTCs) are effective tools to bolster the economic security of low- and middle-income families and position the next generation for success.

The Child Tax Credit (CTC) is an important tool to fight child poverty and help families make ends meet. When designed well, it can also make tax systems less regressive. As of 2020, only six states had CTCs. Today, 15 states have CTCs, with many credits exceeding $1,000 per qualifying child.