November 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.

New Reports and Resources

New report from the Center on Budget and Policy Priorities
The Impact of State Income Taxes on Low-Income Families in 2007 finds that many states tax working poor families deeper into poverty. In 18 of the 42 states that levy income taxes, the income level at which the state taxes families was less than the federal poverty level for a family of four, which is $21,206. The report makes policy recommendations for how these states can reduce or eliminate income taxes on low-income families including enacting or expanding a state Earned Income Tax Credit.
Read the report

New resource from the Brookings Institution: Profiles of EITC-eligible taxpayers in each state
Using detailed data from the 2007 American Community Survey, The Brookings Institution has created profiles of EITC-eligible taxpayers in each state and in the 100 largest metropolitan areas throughout the country.  These profiles provide a range of information on the EITC-eligible population in your community, including filing status, number of qualifying children, adjusted gross income and size of EITC for which they qualify.  
Read the profiles

Tax Policy Center article summarizes how refundable tax credits have cut taxes for low-income households
The Tax Policy Center, a joint initiative of the Brookings Institution and the Urban Institute published an issue of “Tax Facts” that summarizes how since 1979 the average effective tax rate has dropped primarily due to refundable tax credits like the Earned Income and Child Tax Credits.
Read the Tax Facts

New policy brief from Institute for Taxation and Economic Policy
The Institute for Taxation and Economic Policy released a two-page brief explaining the federal and state EITC.
Read the brief

IRS announces annual inflation adjustment for 2009
The IRS announced the inflation adjustment for 2009 including the maximum EITC credit and the income amounts for each type of family. The amounts are summarized in the table below:

Tax Policy Center examines EITC reform options intended to encourage work among low-income men
The EITC has succeeded in bringing low-income women into the workforce, but not low-income men according to a new paper from the Tax Policy Center. This paper analyzes several EITC reforms directed at increasing the EITC for low-income workers, some of which are focused on bringing less-educated men into the labor force. The Next Stage for Social Policy: Encouraging Work and Family Formation among Low-Income Men estimates the cost of various proposals and puts forth an additional proposal that breaks the EITC into two groups – one for individual workers and one for families with children.
Read the report
 

State Updates

New Mexico expands its state EITC
Next Mexico expanded its state Earned Income Tax Credit from 8 to 10 percent of the federal EITC during a special legislative session. New Mexico Gov. Bill Richardson called the special session in August to consider tax relief, highway financing, health care and other economic issues. As part of the package, New Mexico will provide a one-time tax rebate for families earning up to $70,000 along with a permanent expansion to the state's EITC. The expanded credit will be available for tax year 2008 and beyond.

Virginia groups plan for campaign to make EITC refundable
A coalition of advocates gathered in October to begin planning for a long-term campaign with the goal of expanding the state’s EITC. Virginia is currently one of three states that has a non-refundable EITC, meaning any amount over the tax liability is not refunded to the tax filer. Advocates would like to see the EITC made fully refundable, which would bring millions of dollars back to working low-income Virginia families. Earlier this summer, The Commonwealth Institute published an issue brief as the legislature met for a special session to address transportation funding. The brief proposed making the state’s EITC fully refundable to offset the regressive tax increases the legislature was considering to pay for transportation. The Institute is currently working on an EITC issue brief that will be released in the coming months.
Read the issue brief

West Virginia working group planning for state EITC campaign
Led by the West Virginia Center on Budget & Policy and the Alliance for Sustainable Families, a working group met in October for the first time to discuss organizing for a state EITC campaign. Senator John D. Rockefeller, IV stopped by the meeting to express his gratitude and support for the groups’ interest in helping hard-working low-income West Virginia Families. The West Virginia Center on Budget & Policy released a report and fact sheet on a state Earned Income Tax Credit in West Virginia.
Read the report
Read the fact sheet