Stay Informed!

By Ethan Geiling on 04/26/2011 @ 06:00 PM

Tags: Assets & Opportunity Initiative, EITC, Local Policy, Policy Alerts

The Earned Income Tax Credit (EITC) is the largest federal anti-poverty program; it provided about $59 billion to 25 million families last year. The refundable credit is targeted at low-income working families with earned income, usually in the form of wages, salary or self-employment earnings. The specific amount of the credit a family can receive depends on both income and the number of qualifying children. The EITC was originally enacted in 1975, and has expanded with bipartisan support since then. Ronald Reagan once called the EITC “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”

Currently 24 states and DC have their own version of the EITC that builds on the federal credit. These state EITCs range from 3.5% of the federal credit in Louisiana to 40% of the federal credit in the District of Colombia.

Unfortunately, the EITC is under attack in a number of states. Legislation was introduced in Michigan to eliminate the state EITC, which is currently 20% of the federal credit. If enacted, this would reduce incomes for 800,000 working families and push 14,000 children into poverty. Similarly, legislation was introduced in North Carolina to eliminate the refundable portion of the state EITC. Advocates in both states have been actively fighting to preserve the credit.

However, there is still some positive news. Five states – Connecticut, Missouri, Montana, North Dakota and West Virginia – have introduced legislation to create a state EITC, while four states – Illinois, Iowa, New Jersey and Oregon – have introduced legislation to expand their state EITCs. The most promising efforts are in Connecticut, where Governor Malloy has publicly endorsed a state EITC. The Connecticut legislature is reviewing two bills to establish a state EITC: SB 41 calls for a phase-in of a credit starting at 10% of the federal EITC in 2012 and increasing to 20% by 2014; and HB 5701 calls for a state credit equal to 20% of the federal EITC.

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