CTJ and ITEP are joining in the effort to promote the EITC Awareness Day outreach campaign as it celebrates its 10th anniversary. Over the past decade, the IRS has joined partners nationwide to ensure that low- and moderate-income workers are given the credit they deserve. The federal EITC and state EITCs are well worth celebrating as anti-poverty measures that lift millions of working Americans out of poverty.
Since its introduction in 1975, the federal Earned Income Tax Credit (EITC) has rewarded work and boosted the economic security of low-wage workers. Over the past several decades, the effectiveness of the EITC has been magnified as the federal credit has been expanded and 26 states have enacted, and later expanded, their own credits.
The most recent expansion of the federal credit occurred in 2009 as part of the American Recovery and Reinvestment Act (ARRA). Under ARRA the EITC was temporarily enhanced for families with three or more children and for married couples. These vital enhancements were extended through 2017 in subsequent legislation and – in a big win for low-wage workers across the country – were made permanent late last year. For more on the impact by state of expanding the EITC click here for an interactive map. This permanent improvement to the credit will prevent 16.4 million Americans from being pushed into or deeper into poverty.
The case for an EITC is even stronger at the state level, as we explain in our report Rewarding Work Through State Earned Income Tax Credits. State and local taxes are regressive, requiring low- and moderate-income families to pay more of their income in taxes than wealthy taxpayers. To date, twenty-six states and the District of Columbia have EITCs in place to supplement the federal credit. This past year lawmakers from both sides of the aisle came together in five states to champion state EITCs. California became the 26th state to enact an EITC; theirs is loosely based on the federal credit, but targeted only to those living in deep poverty. Building from the bipartisan momentum of 2015 state EITC reforms, a number of states are heading into their legislative sessions with EITC enactment and reform on the agenda. ITEP’s State Tax Policy Director, Meg Wiehe, flags this as a trend to watch in 2016.
Stay tuned for an upcoming blog post that will provide a more in-depth look at how states are likely to address poverty and inequality through tax breaks for working families in 2016.