Creating a State Earned Income Tax Credit (EITC)

07 January 2016 Written by  

Even as we strive to ensure that we are investing sufficient resources in laying the foundations for our future prosperity, we must also ensure that no family is taxed into poverty as the price of educating their children.

The federal Earned Income Tax Credit (EITC) already lifts over 70,000 Utahns out of poverty each year, nearly half of them children.

The EITC reduces poverty responsibly, by encouraging work and reducing welfare dependence for parents. It also produces gains in health and education for their children. That’s why it has always enjoyed such broad political support, from Presidents Reagan and Bush (I and II) to Clinton and Obama. U.S. House Speaker Paul Ryan has proposed expanding it, saying in a 2014 speech at the American Enterprise Institute, “This is one of the few programs that have shown results. It encourages people to work by increasing the rewards of work.”

eitc bipartisan support

But Utah doesn’t need to wait for federal action.

We can become the 27th state to create a state EITC, matching the federal credit while using it to encourage saving for future education and advancement.

26 states have a state EITC

(percentages of the federal EITC)

CA – 85% up to half of the fed phase-in range (only W-2 income – self-employment income excluded)

CO – 10% (not yet funded)

CT – 27.5%

DE – 20%

IL – 10%

IN – 9%

IA – 15%

KS – 17%

LA – 3.5%

ME – 5%

MD – 28%

MA – 23%

MI – 6%

MN – 25-45% varies with income

NE – 10%

NJ – 30%

NM – 10%

NY – 30%

OH – 10%

OK – 5%

OR – 8%

RI – 12.5%

VT – 32%

VA – 20%

WA – 10% or $50, whichever is greater (not yet funded)

WI – 1 child 4%; 2 children 11%; 3 children 34%

Who would receive Utah’s state EITC?

• About 195,000 households – 18% of all tax filers

• EITC households include 218,500 workers and 291,000 children

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2016 Children's Fiscal Policy Agenda

For 30 years now, Voices for Utah Children has called on our state, federal and local leaders to put children’s needs first. But the work is not done. The children of 30 years ago now have children of their own. Too many of these children are growing up in poverty, without access to healthcare or quality educational opportunities.

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We look forward to the future of Voices for Utah Children and we hope you will be a part of our next 30 years.

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Matthew Weinstein 300Matthew Weinstein, State Priorities Partnership Director, joined the organization in 2014. As State Fiscal Policy Director, he conducts analysis and advocacy focused on the state budget from the perspective of what's best for Utah's children. He holds a Master of Public Policy degree from Georgetown University and a B.A. in Political Science from Amherst College.