Tax Credits for Working Families

Rhode Island EITC Increases to 12.5%

June 30th, 2015

By Lauren Pescatore

Moments ago, Rhode Island Gov. Gina Raimondo signed into law a budget that increases the state’s Earned Income Tax Credit (EITC) from 10 to 12.5 percent of the federal credit – a first step in restoring recent cuts made to the size of the state’s EITC.

Just last year, Rhode Island’s EITC was reduced from 25 to 10 percent of the federal credit, but made fully refundable. State advocates worked diligently throughout the year to engage Rhode Islanders and inform lawmakers on the importance of expanding the credit. Rhode Island’s larger EITC will help more than 80,000 workers in the state keep more of their earnings in order to support themselves and their families.

Rhode Island is now the third in a string of states to see positive EITC activity this session. Just last week, California became the 26th state to offer an EITC, while New Jersey increased its credit yesterday from 20 to 30 percent of the federal credit. We’re hopeful for a positive outcome in Michigan - the only state currently considering eliminating their existing credit.

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New Jersey’s EITC Increases to 30 Percent

June 29th, 2015

New Jersey Gov. Chris Christie (R) has taken a red pen to the state budget once again. Only this year, he did not line-item veto an increase for the Earned Income Tax Credit (EITC) and even went as far as to suggest an even larger credit as an alternative, a proposal that state lawmakers gladly accepted just moments ago.

After reviewing the $35.3 billion budget plan, which raised taxes on corporations and the wealthy to fund projects such as expanding the EITC from 20 to 25 percent of the federal credit, Christie announced that while he opposed raising taxes for the wealthy, he was in favor of lowering taxes for the state’s working poor. In a conditional veto of the “millionaire’s tax,” Gov. Christie proposed increasing the state’s EITC to 30 percent.

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News Round-up: June 29, 2015

June 29th, 2015

Here are some highlights from the past week’s news on family tax credit issues. Remember – you also can track news coverage throughout the week by visiting our RSS feed, where you can filter news by a specific credit and/or state.

  • New Jersey Gov. Chris Christie (R), who will announce he is running for president this week, praised the legislature’s effort to raise the EITC to 25 percent of the federal credit and even suggested a 30 percent EITC in a conditional veto of an increased tax on corporations and the wealthy. This is a policy shift for Christie, who signed a bill to reduce the state’s EITC from 25 to 20 percent in 2010 and vetoed the restoration of the credit just last year (NJ.com, NJ Spotlight). New Jersey Policy Perspective (NJPP) released a report on how an EITC at 30 percent of the federal credit could help the state’s working families (NJPP).

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Same-Sex Couples Can Now File Jointly in all 50 States: What that Means for Their Tax Credit Eligibility

June 26th, 2015

By Kate Skochdopole

Today the Supreme Court legalized same-sex marriage across the country, making it possible for millions of LGBT couples to marry in their home states. During this time of celebration, most probably aren’t focusing on what this means for their federal tax returns. But once these couples take their vows, how they choose to file their taxes and what benefits they are eligible for may change dramatically.

Because married Americans who file jointly pay taxes on the couple’s combined taxable income, newly married same-sex couples should expect changes when it comes to their tax liability and eligibility for tax credits such as the Earned Income Tax Credit (EITC). That’s good news because the EITC, which already lifts 6.5 million Americans out of poverty each year, can now help more gay and lesbian workers support themselves and their families.

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California Joins the Majority of States to Offer an EITC

June 25th, 2015

By Lauren Pescatore

Yesterday, California Gov. Jerry Brown (D) signed into law a budget that includes the creation of a refundable state-level Earned Income Tax Credit (EITC). The state becomes the 26th in the nation to offer additional support for workers and their families by complementing the federal EITC with a state version.

California’s new credit is impressively large. Parents earning just under $7,000 each year will qualify for the maximum state EITC of $2,358. Combined with the federal credit, the new state EITC could boost this parent’s income by nearly three-quarters, according to the California Budget & Policy Center (CBPC).

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Rand Paul Promises to “Blow Up the Tax Code.” Would the EITC and CTC Survive?

June 23rd, 2015

By Kate Skochdopole

Presidential hopeful Sen. Rand Paul (R-Ky.) recently announced his tax reform plan, a $2 trillion tax cut that seeks to, in his own words, “blow up” the current system. The plan would eliminate all individual and corporate income tax and implement a flat tax rate of 14.5 percent for all earners.

Unlike most flat tax proposals, Paul’s plan would retain vital tax credits for working families like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). However, the plan does little to expand the credits or any other benefits for lower-income workers. The bulk of Paul’s proposed tax cut would instead benefit the wealthiest Americans. Howard Gleckman of Tax Vox  estimates that top earners would pay as much as 60 percent less in taxes under Paul’s plan and even less if they use existing deductions such as those for charitable giving and mortgage interest. The Tax Foundation estimates that taxes among low- and middle-income earners might drop by 11 percent while those at the top could see theirs fall by at least 27 percent.

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News Round-up: June 22, 2015

June 22nd, 2015

Here are some highlights from the past week’s news on family tax credit issues. Remember – you also can track news coverage throughout the week by visiting our RSS feed, where you can filter news by a specific credit and/or state.

  • The California legislature passed a state budget that includes the creation of an Earned Income Tax Credit (EITC). The bill is awaiting Gov. Jerry Brown’s (D) signature (NBC News, SF Gate, Huffington Post).

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Hillary Has Some Good Ideas for Boosting Youth Employment. Here’s What Else She Can Do.

June 18th, 2015

By Lauren Pescatore

Democratic presidential hopeful Hillary Clinton unveiled a plan Wednesday to provide tax credits for businesses as an incentive for training and hiring new workers. While Clinton made clear that the credits are meant to encourage businesses to hire workers of all ages, the former senator and Secretary of State emphasized that these credits would boost youth employment rates in particular.

Employment rates for younger workers are indeed low. Contrary to the popular assumption that millennials are handed everything on a silver platter, poverty runs rampant throughout the generation and the unemployment rate of 7.8 percent is more than 2 percent higher than the national average. For young black adults it is nearly double that rate – 14.6 percent. According to Census Bureau data, one in five millennials lives in poverty and the generation as a whole makes less money and has lower rates of employment than their parents’ generation.

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Michigan House Votes to Raise Taxes on Low-Wage Workers, Senate Poised to Follow

June 15th, 2015

By Lauren Pescatore

The 2015 legislative session has brought trouble for the Michigan Earned Income Tax Credit (EITC). In early May, an EITC expansion fell victim to a ballot proposal that would have increased the state’s sales tax in order to fund transportation improvements. Michigan voters, not wanting to see their taxes increase, soundly rejected the measure.

Now, the credit is on the chopping block and many Michiganders are once again faced with a tax increase. Last Wednesday, the Michigan House approved a plan to fund transportation improvements by eliminating the state’s EITC completely. The Senate Majority Leader has made clear that he and most of his caucus also support eliminating the credit.

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News Round-up: June 15, 2015

June 15th, 2015

Here are some highlights from the past week’s news on family tax credit issues. Remember – you also can track news coverage throughout the week by visiting our RSS feed, where you can filter news by a specific credit and/or state.

  • After passing a budget bill to increase the state’s Earned Income Tax Credit (EITC), Massachusetts senators defended their legislation before the state Supreme Judicial Court. Lawmakers argue that since all Massachusetts bills that impose taxes must originate in the House, the Senate-approved budget is unconstitutional (MassLive, Boston Herald).

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