August, 2004
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. Additional information on the federal EITC can be found at: www.eitc.info.
Feel free to forward this newsletter to your interested associates and to email sarah@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.
In this edition of the policy update:
•
Virginia
Passes State EITC
• Hatcher Group Report
Highlights New Opportunities for State EITCs in 2005
• Oklahoma Supreme Court
Upholds State EITC
• Colorado's EITC
Program Suspended for the Second Year in 2003
• Legislation
Passed in Maine Slightly Reduces EITC
• New Report Calls
for a State EITC in Connecticut
• Treasury Department
Proposes New Measures to Simplify EITC
• CDF-Minnesota Newsletter
Highlights EITC Opportunities and Benefits
• New Report Illustrates
How EITC Helps Working Families Escape Poverty
• Report Compares EITC
and Food Stamp Program Participation
• State Tax Burden
Too High for Low-Income Families, Report Says
• Brookings
Institution Scholar Examines the Expansion of EITC
• NCTC and Annie E.
Casey Foundation Sponsor Conference on Tax Preparation
• I-CAN EIC Releases Report
on Usage in the 2004 Tax Season
Virginia
Passes State EITC
Virginia has become the 18th state in the nation to adopt a state EITC
as part of a landmark tax reform bill passed this spring. The credit will
help protect low-income families struggling to stay above the poverty
line from a "cliff" in the state tax code that hits these families
with high tax bills even though they make near poverty wages. These families
will now have a choice between using the existing low-income credit or
a 20% non-refundable EITC. The new EITC legislation will take effect beginning
January 1st, 2006.
Go to: http://leg1.state.va.us/cgi-bin/legp504.exe?ses=042&typ=bil&val=HB5018
Hatcher Group Report Highlights New Opportunities for State EITCs in 2005
The
Hatcher Group has released a new report, “Greener Pastures for Working
Families: New Opportunities for State Earned Income Tax Credits in 2005,”
that examines the efforts of five state coalitions Arkansas, Indiana,
Idaho, Rhode Island, and Utah that are working to enact or expand a state
EITC. The report finds that the upcoming elections, improved state budget
situations, greater awareness of the EITC from free tax assistance campaigns,
and the political groundwork laid by campaigns last year, are producing
a remarkably favorable environment for state EITCs in 2005.
Go to: http://www.stateeitc.org/pdf/Greener%20Pastures1.pdf
Oklahoma Supreme Court Upholds State EITC
On July 6th,
the Oklahoma Supreme Court upheld the state EITC declaring that “it
isn’t an unconstitutional gift to low-income taxpayers.” Jerry
Fent of Oklahoma City challenged the state tax credit claiming, “in
the Oklahoma Constitution, we have a provision prohibiting the giving
of gifts,” and, “it gives state money to people who do not
owe any taxes or pay any taxes at all.” The Court believes that
the state EITC promotes the general welfare, economic security and prosperity
of its citizens, therefore it does not constitute a gift by the state
to individuals.
Go to: http://www.oscn.net/applications/oscn/deliverdocument.asp?citeid=439867
Colorado's EITC Program Suspended for the Second Year in 2003
Due to the
absence of surplus revenues, the Colorado legislature has once again suspended
its EITC program. This suspension comes at a time when low-income families
need the credit most. Colorado has lost more jobs and income than virtually
any other state in recession, and has suffered one of the nation's steepest
declines in tax revenue. The state’s Taxpayers Bill of Rights (TABOR)
stipulates that the EITC can only be implemented when there is a surplus
in tax revenues—a policy which hurts the taxpayers who suffer the
most in a poor economy. This problem is highlighted in the Bell Policy
Center report on Colorado’s working families.
To view the full report on Colorado's Working Families, go to:
http://www.thebell.org
To view report on the TABOR's impact on fiscal problems, go to:
http://www.cbpp.org/3-17-04sfp.htm
Legislation
Passed in Maine Slightly Reduces EITC
Maine's legislators recently passed a bill that reduced the state’s
EITC from 5% to 4.92% for the 2003, 2004 and 2005 tax years. This measure
was part of a much larger budget bill which will cut the cost of current
services for 2004-2005 by approximately 20%. However, the EITC will automatically
revert back to its former level after the 2005 tax year. Maine’s
Taxpayers for a Fair Budget Coalition continues to advocate for expanding
the state earned income tax credit as part of a broader tax reform platform
that also includes targeted property tax relief and shifting revenues
away from the property tax and onto a broader state sales tax.
Go to: http://janus.state.me.us/legis/statutes/36/title36sec5219-S.html
New Report Calls for a State EITC in Connecticut
In July,
Connecticut Voices for Children released a report that calls for building
on the success of the federal EITC by creating a state level EITC set
at 20% of the federal credit. Currently the federal EITC contributes $217
million in economic stimulus to Connecticut families. It is estimated
that a state EITC at this level would provide $43 million more to Connecticut’s
low-wage families helping them to better meet their children’s needs.
Go
to: http://www.ctkidslink.org/pub_detail_175.html
Treasury Department Proposes New Measures to Simplify EITC
The Treasury Department has proposed five new measures to simplify and reduce errors in the EITC as part of the Administration’s fiscal year 2005 budget. They include: a uniform definition of “qualifying child;” simplifying the “abandoned spouse” rule; allowing filers who are eligible to claim a child for EITC but do not to claim the smaller EITC for workers not raising a child; eliminating the EITC investment income text; and fixing the definition of “non-work SSNs” in the EITC statute. In addition to these changes, the Treasury Department is proposing to simplify procedures used by families in calculating the refundable component of the child tax credit. In earlier comments regarding the EITC-related proposals, Senate Finance Committee Chairman Charles Grassley stated, “I applaud the administration in recognizing that simplification should start with low-income families.”
Go to: http://www.cbpp.org/6-9-04tax.htm
CDF-Minnesota
Newsletter Highlights EITC Opportunities and Benefits
Children's Defense Fund-Minnesota highlighted the state and federal EITCs
in its June newsletter. Working taxpayers who earn less than $34,692 annually
are eligible for both the EITC and Minnesota’s Working Families
Credit, the sum of which could potentially add about 50% to a family’s
income. The newsletter also outlines ways that community members can promote
the EITC and other tax credits in order to enable more to families claim
them.
Go to: http://www.cdf-mn.org/PDF/Publications/CDF_Jan_04.pdf
New
Report Illustrates How EITC Helps Working Families Escape Poverty
The Center on Budget and Policy Priorities has released a new report entitled,
“A Hand Up: How State Earned Income Tax Credits Help Working Families
Escape Poverty in 2004.” The report highlights the many benefits
of the EITC and praises the program for its success in supporting work
and reducing poverty. According the authors, the federal credit lifts
more children out of poverty than any other government program. EITC has
also been proven effective in encouraging work among welfare recipients,
especially amongst single mothers.
Go to: http://www.cbpp.org/5-14-04sfp.htm
Report
Compares EITC and Food Stamp Program Participation
A new report by the Urban Institute illustrates the important relationship
between the EITC and Food Stamp Program in supporting low-income families.
The report, “Relationship between EITC and Food Stamp Program (FSP)
Participation among Households with Children,” pays specific attention
to the negative impact of EITC on FSP participation. The study found that
while EITC payments did not reduce the potential size of a household’s
food stamp allotment under FSP rules, they did add to the household’s
resources. Therefore the EITC has the potential to reduce the household’s
willingness to participate in the FSP.
Go to: http://www.ers.usda.gov/publications/efan04002/
State
Tax Burden Too High for Low-Income Families, Report Says
The Center on Budget and Policy Priorities has released a new report,
“State Income Tax Burdens on Low-Income Families in 2003,”
showing that low-income working families in many states continued to face
a substantial tax burden as they filed personal income taxes for 2003.
In a large number of the states that levy income taxes—18 out of
42 states—two-parent families of four with incomes below the federal
poverty line continue to owe income tax, making it even more difficult
for them to become self-sufficient. The state EITC was one of several
mechanisms that states used to reduce or eliminate tax burdens for low-income
families.
Go to: http://www.cbpp.org/4-8-04sfp.htm
Brookings Institution Scholar Examines the Expansion of EITC
In his June presentation to the EITC Funders Network, Alan Berube, a senior research associate at the Brookings Institution, examined the growth of outreach campaigns organized around the EITC in communities across the United States. According to Berube, various factors played a part in the expansion of such programs, including the EITC’s efficacy in reducing poverty and the large EITC federal investment in urban areas. Berube stressed the need for outreach programs to educate eligible families about the tax credit.
Go to: http://www.brookings.edu/metro/speeches/20040621_EITC.pdf
NCTC and Annie E. Casey Foundation Sponsor Conference on Tax Preparation
On June 22 and 23 at the Hilton Chicago, the National Community Tax Coalition and the Annie E. Casey Foundation Cross Site Learning Exchange teamed up to sponsor their third annual conference, “Building the Financial Futures of Working Families: Challenges Facing the Free Tax Preparation Field.” The conference offered free tax preparation workers the opportunity to learn about new promotional strategies and review the latest policy changes to EITC and the rest of the tax code.
Go to: http://www.tax-coalition.org/
I-CAN EIC Releases Report on Usage in the 2004 Tax Season
I-CAN!™
EIC released a report that sums up the online data received for the 2004
tax season. I-CAN!™ EIC is a free online tax provider, created by
the Legal Aid Society of Orange County, which helps low-wage earners claim
the Earned Income Tax Credit, and keep it. I-CAN!™ EIC will complete
federal tax forms, and some state returns (California, Maryland, Massachusetts,
Montana, and Oklahoma), for any taxpayer eligible for the EITC. In the
five states where state returns via I-CANTM are available, the 1381 users
received returns totaling over $3 million, more than two-thirds of which
were in EITC refunds. It was also revealed that nearly half of users e-filed
their return.
Go
to: http://www.icanefile.org/programs/Resources/PrintedMaterials/Tax%20Reports%202004.pdf
| Newsletter Editors | |
| Sarah
Samson |
Phone: 301-656-0348 |