This week, the Census Bureau released new data showing that the share of Americans living in poverty in 2012 remained high, despite other signs of economic recovery. While the national poverty rate (15%) and the rates in most states are holding steady, the number of people living in poverty today is much greater than in 2007, prior to the start of the recession.
The good news is that policy makers have at their disposal several affordable, targeted and effective tax policy tools to alleviate economic hardship and help families escape poverty. An updated report from our partner organization, the Institute on Taxation and Economic Policy (ITEP), “State Tax Codes as Poverty Fighting Tools,” provides a comprehensive view of anti-poverty tax policies state-by-state, surveys tax policy decisions made in the states in 2013, and offers recommendations tailored to policymakers in each state as they work to combat poverty. As ITEP lays out in its signature Who Pays report, virtually every state and local tax system is regressive, contributing to the challenges of America’s low-income families; State Tax Codes as Poverty Fighting Tools details some options for reversing that.
See ITEP's companion report, Low Tax for Who?
In most states, truly remedying tax unfairness would require comprehensive tax reform. Short of this, lawmakers should consider enacting or enhancing four key anti-poverty tax polices explained in the report: the Earned Income Tax Credit, property tax circuit breakers, targeted low-income tax credits, and child-related tax credits. (Each of these provisions is also described in an ITEP stand-alone policy brief.) Unfortunately lawmakers in a number of states have moved in the wrong direction this year (North Carolina, Ohio and Kansas are top of the list), pursuing massive tax shifts that would hike taxes on their poorest residents while unjustifiably reducing them for the wealthiest individuals and profitable corporations.
Given the persistence of poverty in the states as documented by the new Census data, policy makers should be focused on finding ways to boost the incomes of low- and moderate-income families rather than taxing them deeper into poverty in order to provide tax breaks to the well- heeled.