Tax Credits for Working Families

Archive for the ‘State’ Category

Tax Credits for Working Families Releases Case Study on Vermont Battle to Preserve State EITC

September 23rd, 2013

The third in our series of case studies of recent battles over state Earned Income Tax Credits (EITCs) is Vermont, where in 2013 advocates preserved the full state EITC after a Democratic governor proposed reducing it by two-thirds. The study includes:

  • Background information on the political environment in Vermont in 2013;
  • The structure of the campaign to preserve the state’s EITC and the strategy they employed;
  • How key messages resonated with the campaign’s audience;
  • The next steps necessary to continue to preserve Vermont’s EITC; and
  • Tips from advocates.

The full case study is available here. Be sure to watch for our blog as we continue to release a new case study each week.

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North Carolina reduces its state EITC and allows it to expire for future years

March 15th, 2013

On Wednesday, North Carolina Gov. Pat McCrory signed legislation that not only reduces the state’s Earned Income Tax Credit (EITC) from the current 5 percent to 4.5 percent of the federal credit, but also allows the credit to expire altogether at the end of 2013 as scheduled.

This is not the definitive elimination of the state EITC. A strong coalition of advocates will continue to make the case that the EITC is essential for a fair tax system and must remain part of the ongoing, broader debate about the budget and tax reform.

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The EITC as an Election Issue in Wisconsin

May 31st, 2012

Next Tuesday, Wisconsin voters will go to the polls to decide whether to recall their governor, and four Republican senators. The recall effort was led by unions and largely fueled by anger over changes that effectively ended collective bargaining rights for public employees in the state. However, last year’s cut to the Earned Income Tax Credit (EITC) is also being debated.  (For example, on this list of twelve reasons to recall Governor Scott Walker, the cut to the EITC ranks fourth.)

Usually debates over whether to enact or expand tax credits for working families attract little public attention. Discussions stay in the state capitol, with maybe a press article or two. Advocates have often deliberately chosen to keep the debate low-profile, working directly with legislators.

However, the last year or two suggest that when tax credits are under attack, a more public advocacy strategy may prove useful. Last year we blogged about the public attention that cuts to state EITCs in Wisconsin and Michigan had drawn. This year the fights in Kansas and Oklahoma also drew considerable press attention.  We’ll be watching the election results on Tuesday, to see if there are any exit polls or other indications that the EITC was a factor in the outcome.

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Oklahoma preserves all its tax credits; Kansas keeps EITC but eliminates others

May 29th, 2012

Last week Oklahoma and Kansas wrapped up the year’s two hottest battles over working family tax credits. Both states considered eliminating several important tax credits for low- and middle-income working families as part of legislative efforts to reduce or eliminate their individual state income tax. Oklahoma advocates won complete victory; Kansas advocates had a more bittersweet partial victory, saving the Earned Income Tax Credit (EITC) but losing the Child Care Credit and other important family tax provisions.

This February the future of Oklahoma tax credits for working families looked bleak. Governor Mary Fallin proposed reducing and eventually eliminating the income tax in favor of a sales tax system, offsetting the lost revenues by eliminating many tax credits, including Oklahoma’s EITC, Child Tax Credit, Child Care Credit and Refund of Property Tax Credit, a property tax circuit breaker. Bills to reduce the income tax and pay for it by eliminating all of these credits subsequently passed both the House and Senate.

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Posted in Child and Dependent Care Tax Credit, Child Tax Credit, Earned Income Tax Credit, Property Tax Circuit Breaker, Recent Updates, State | Comments Off

Guest Commentary: The Conservative Anti-Poverty Program

May 16th, 2012

By Gene Perry, Policy Analyst for OK Policy

In all of the major [Oklahoma] income tax proposals this year (including the plan announced yesterday by [Oklahoma] Senate Republicans), the Earned Income Tax Credit (EITC) has been targeted for elimination. That’s strange, because lawmakers have made no clear argument for why we should lose this credit. They’ve spoken about the need to end handouts to “corporate special-interests,” but the EITC goes to low-income working families.

It’s also strange because the EITC has a long history of support from conservative leaders. For example, at the State Chamber of Oklahoma’s tax policy forum earlier this month, Arthur Laffer said he would favor a “negative income tax” that pays credits to those earning below a certain amount.

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The Benefits of State EITC Expansion for Children’s Health

May 16th, 2012

The Carsey Institute has just released a new brief on the benefits of state Earned Income Tax Credits (EITCs) for children’s health, looking particularly at the different advantages in urban and rural communities. Until now, there had not been much research on the health gains associated with the EITC.  (You can find research on some of the other positive effects of the EITC on child-wellbeing on our website or by searching our blog.)

The brief looks at the effect of state EITCs on children’s health by examining changes in health-related outcomes for children in the fourteen states that adopted EITCs between 1990 and 2006. The brief finds that when states enact EITCs, many children move from public to private health insurance, increasing private health insurance coverage for children by 8.4 percent, while reducing children’s participation in public programs such as Medicaid and State Children’s Health Insurance Programs (SCHIPs) by 13.9 percent. The changes were statistically significant for children between the ages of 6 and 14. (While the brief does not discuss why changes to health insurance coverage were most pronounced among children in this age-range, it seems likely that the cost barrier to work was lower because it was easier for parents of children in this age group to move into the workforce or work more hours, as their children may have still needed afterschool and summer care but no longer required more expensive, full-time day care. Similarly,  parents with children older than 14 may have already entered the workforce, since they no longer needed to pay any expenses for childcare.) There was no statistical difference in the number of uninsured children. After state EITCs were implemented, more mothers also reported that their children ages 11 to 14 were in excellent health.

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2012 State Legislative Preview

March 1st, 2012

In 2012, nearly half the states are considering changes to at least one of these four tax credits for working families.

Threats: Most worrisome are the proposals in Kansas and Oklahoma. In Kansas, Governor Sam Brownback proposed eliminating the EITC and child and dependent care credit as part of a major tax system revision to reduce the income tax and cut taxes for businesses. However, rather than eliminating the EITC entirely, the House Tax Committee passed a bill that would cut the EITC in half and make it non-refundable. Oklahoma is also facing a serious effort to eliminate the EITC, child tax credit, child and dependent care credit, and property tax circuit breaker, as Governor Mary Fallin and the legislature consider a number of different proposals to reduce or eliminate the state income tax system in favor of a sales tax system.

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2011 State Legislative Review

March 1st, 2012

Last year, we saw major developments unfold on tax credits for working families in a number of states. In some states, governors and legislators reduced these credits to help offset the cost of tax cuts, particularly for businesses, and help balance their budgets. In others, policymakers created or improved family tax credits to help protect low- and moderate-income families from tax increases, as part of a package of broader tax reform to raise revenues.

Losses: In Michigan, in order to help offset new business tax cuts and balance the budget, the EITC was scaled back from 20 percent to 6 percent of the federal credit, and the state’s property tax circuit breaker credit was reduced or completely eliminated for many low- and middle-income homeowners and renters. The final outcome was a significant improvement over the initial proposals, which would have completely eliminated both credits.

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Efforts to Reduce or Eliminate State Income Taxes Threaten Family Tax Credits

February 9th, 2012

Republicans across the country are setting their sights on reducing or eliminating state income taxes. This could result in the loss of working family tax credits.

The GOP has launched efforts against state income taxes in at least seven states: Idaho, Kansas, Maine, Missouri, Ohio, Oklahoma, and South Carolina. Eliminating the income tax in these states would also eliminate tax credits for working families that are administered through the income tax. Even where the income tax is reduced but not eliminated, tax credits may be shrunk or completely eliminated to off-set the lost revenues from the change in income tax. If these efforts are successful, they will create a more regressive state tax structure, meaning that low- and moderate-income taxpayers will not only end up paying more taxes on each dollar of income than they did before, but also they may pay more taxes on each dollar of income than higher-income taxpayers. (The tax system also may become more regressive because the state is likely to rely on a regressive sales tax to make up revenue differences.)

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Posted in Child and Dependent Care Tax Credit, Child Tax Credit, Earned Income Tax Credit, Property Tax Circuit Breaker, Recent Updates, State | Comments Off

Illinois Doubles its State EITC

December 15th, 2011

This week the Illinois legislature passed a bill to increase its Earned Income Tax Credit, doubling the size of the credit to 10 percent of the federal EITC, phased in over three years. The bill cleared its final legislative hurdle Tuesday when the Senate passed it in a special session, after the House passed the bill on Monday. Governor Pat Quinn is expected to sign the bill, which is paired with a bill to cut taxes for corporations and smaller businesses.

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