July 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:

The District of Columbia expands state Earned Income Tax Credit
As part of the District of Columbia's budget, the City Council included a significant increase in the District's EITC, taking it from 35 percent to 40 percent of the federal credit. This change increases the District's EITC benefits citywide by an estimated $5 million, and increases the average EITC benefit for the 47,000 households that claim it by roughly $100, from $760 to $865 per year. The District’s EITC is the most generous state-level EITC in the nation.

North Carolina increases new state EITC
The North Carolina legislature passed an increase in the state's EITC. The state EITC was originally created during the 2007 legislative session and was set at 3.5 percent. The 2009 budget expands the EITC to 5 percent beginning in tax year 2009.

New Mexico Legislature to consider EITC expansion in upcoming special session
New Mexico Gov. Bill Richardson is calling the legislature into special session in August to consider an economic relief package. Gov. Richardson's proposed package includes a one-time tax rebate of approximately $150 per taxpayer, a tax holiday during back-to-school time and the holiday season and most importantly, an expansion of the state's EITC (called the Working Families Tax Credit) from 8 percent to 10 percent of the federal credit.
>Read more about Gov. Richardson's economic relief package

Ohio Governor creates Poverty Task Force
Governor Ted Strickland of Ohio announced the creation of an Ohio anti-poverty task force to find ways to help low-income families. Comprised of representatives of state agencies, faith-based groups, nonprofit organizations, businesses and labor unions, as well as Secretary of State Jennifer Brunner and state Treasurer Richard Cordray, the task force met for the first time on July 9th. The task force will provide a set of short-term recommendations to the governor by September 10th and provide long-term recommendations by April 30th. David Rothstein of Policy Matters Ohio, the lead EITC research organization in the state, is a member of the self-sufficiency pathways committee, which will look at the important role the EITC plays in moving people from poverty to self-sufficiency.
>Read about the task force

Pennsylvania Legislature commissions study of state EITC and Tax Forgiveness Program
The Pennsylvania legislature considered legislation to create a state EITC and passed HB377, which commissions a study to compare the effects of a proposed state EITC to the current Tax Forgiveness Program.

Reports and Resources:

New Report from the Brookings Institution on Federal EITC Expansion
In June, the Brookings Institution released a new report proposing specific expansions to the EITC that would especially help low-income people in urban areas. "Metro Raise: Boosting the Earned Income Tax Credit to Help Metropolitan Workers and Families" recommends that Congress make the following three improvements to the EITC program: 1. Increase the EITC for childless workers; 2. Reduce the EITC disparity for dual-earning married couples; and 3. Provide additional EITC benefits to families with three or more children.  Brookings also recommends streamlining the distribution of the EITC so part of it would be available throughout the year rather than only in a one-time lump sum.

The report was released at a policy briefing on Capitol Hill organized by The Hatcher Group.  Panelists, who included international tax experts, state advocates and Capitol Hill staff, supported the recommendations and discussed how the changes could help both metro and rural low-income workers.
>Read the report

2008 Legislative Update on State EITCs
The Center on Budget and Policy Priorities released a 2008 legislative update on state EITCs, which specifically discusses how states without an income tax can follow Washington state’s lead and create a state EITC.
>Read the report

"Jump in State EITCs Results from Foundation-Funded Efforts" by Michael Laracy
Michael Laracy of the Annie E. Casey Foundation discusses the joint effort between Casey, the Charles Stewart Mott Foundation and other national foundations to establish or expand state EITCs. Mr. Laracy also describes how the lessons from this endeavor can help foundations interested in working at the state-level to improve the lives of low-income families. This exclusive commendation was written for Spotlight on Poverty and Opportunity.
>Read the commentary