April 2008

The State EITC Online Resource Center is pleased to present its electronic newsletter on current policy developments around state and federal Earned Income Tax Credits. For more information, please go to: www.stateeitc.com.

Feel free to forward this newsletter to your interested associates and to email amy@thehatchergroup.com with news, information or other resources to be added to the update. If you do not want to receive this newsletter in the future, please reply with the word UNSUBSCRIBE in the header.

State Updates:

Effort to reinstate Colorado EITC dies in committee
A broad-based coalition of more than 40 organizations worked extensively to get the Colorado EITC reinstated during the 2008 legislative session. Researchers from the Colorado Fiscal Policy Institute worked with Rep. John Kefalas (D-Fort Collins) to develop a new funding mechanism for the credit since the state EITC is only available in years that there is surplus revenue. The bill proposed to use federal Temporary Assistance for Needy Families (TANF) block grant money and surplus unemployment insurance funds to fund the state EITC for the next two years. However, the legislation died in committee primarily because county welfare departments opposed using TANF dollars.
>Read an article about the bill in the Colorado Springs Gazette

EITC legislation in Connecticut passes out of committee
Legislation to create a 10 percent Connecticut EITC successfully passed out of the Human Services Committee and the Finance, Revenue and Bonding Committee. Advocates have made the creation of a state EITC a top legislative priority for three years and they hope for success this year, although the legislation still faces an uphill battle.The Democratic leadership continues to fight for the state EITC and argue that it would provide much-needed economic stimulus for Connecticut’s working families and the economy.  Recently, some Republican legislators have voiced support for the state EITC, but the governor remains opposed.
>Read an editorial in the Connecticut Post supporting the state EITC

Indiana passes property tax reform package; includes EITC expansion
As part of a property tax reform package, the Indiana legislature expanded the state’s EITC from 6 percent to 9 percent of the federal credit.  Not originally part of the tax package, House Democrats attached the EITC increase to help reduce the effect of the 1 percentage point increase to the state sales tax that was part of the package.
>Read an article in the Indianapolis Star summarizing the property tax reform package

Efforts to enact a state EITC in Kentucky dies this legislative session
Three bills that would have created a state EITC in Kentucky remained dormant in the House and did not pass during this legislative session.  Advocates made a state EITC a priority this year, but state budget deficits foreclosed most new spending.
>Read a Kentucky Youth Advocates Policy Brief on a state EITC

Pennsylvania governor supports EITC for next budget cycle
At the end of 2007, a state EITC bill passed the Pennsylvania House. A series of tax cut amendments were attached to the bill which would cost the state $4 billion in lost revenue.  The Pennsylvanians for Economic Opportunity coalition issued a statement voicing their disappointment with the amended version of the bill. The coalition turned its attention to supporting a plan by the governor to provide economic stimulus payments to low-income working families.  However, the plan did not receive enough support in the legislature and was withdrawn by the governor.  During his statement that he would withdraw the stimulus payment plan, Governor Rendell pledged to support a state EITC during the next budget cycle.
>Read an article in the Philadelphia Inquirer

Washington enacts state EITC
Washington becomes the 24th state, including the District of Columbia, to enact a state EITC. The Working Families Tax Credit, modeled after a state Earned Income Tax Credit, will equal 5 percent of the federal EITC for tax year 2008 and 2009 and 10 percent for 2010 and after, benefiting more than 350,000 Washington residents. Washington becomes the first state without an income tax to enact a state EITC. The credit will offset the disproportionate amount of income that low- and moderate-income working families pay in sales tax.
>Read more about the Washington Working Families Tax Credit

Reports and Resources:

Brookings Report examines geographic distribution of EITC
The Brookings Institution released a new report on the EITC: “Bridging the Gap: Refundable Tax Credits in Metropolitan and Rural America.” This report, authored by Elizabeth Kneebone, provides an update to the 2004 report “The ‘State’ of Low-Wage Workers” and examines the geographic distribution of the federal EITC using IRS data from tax years 2000 and 2005. 
>View the report “Bridging the Gap: Refundable Tax Credits in Metropolitan and Rural America”

Stateline.org article highlights state EITCs
Stateline.org, an online news outlet that focuses on state policy, published an article on state Earned Income Tax Credits. The article highlights the numerous states that have enacted EITCs and the impact the credit has on working families.
>Read “More states give tax credits to working poor” by Christine Vestal

Tax Year 2005 data available
The Brookings Institution has made available Tax Year 2005 EITC data by state legislative district and is in the process of including state legislative district information to the interactive EITC website.
>Access TY2005 data

New data on how much a state EITC would cost
The Center on Budget and Policy Priorities released its annual analysis of how much a state EITC would cost. The report contains data for a credit set at 5, 10 and 20 percent of the federal credit.
>View the report “How Much Would a State Earned Income Tax Credit Cost in 2009?”

Presidential candidate stances on the EITC
Expanding the federal Earned Income Tax Credit has received attention recently, most notably from New York City Mayor Michael Bloomberg and House Ways & Means Committee Chairman Charles Rangel (D-N.Y.).  Many of the presidential candidates have also proposed increasing the federal EITC.
>Read more about the candidates' stances on tax credits for low-income Americans on the Spotlight on Poverty and Opportunity website
>Read Sen. Hillary Clinton's (D-N.Y.) proposal to increase the EITC
>Read about Sen. John McCain's (R-Ariz.) tax cut plan
>Read Sen. Barack Obama's (D-Ill.) proposal to increase the EITC