What is the EITC?
“The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file. EITC reduces the amount of tax you owe and may give you a refund.”
Estimated Cost of Refundable Texas Earned Income Tax Credits, (FY) 2017:
Federal EITC claims in Tax year 2013: 7.3 Million
Percent of Total U.S. EITC Claims, Tax Year 2013: 10.87%
Estimated Federal EITC Claims in FY 2017 (in millions): 8.2 Million
Estimated Cost of State EITC in FY 2017* (in millions):
- Set at 5% of Federal Credit: $372 Million
- Set at 10% of Federal Credit: $744 Million
- Set at 20% of Federal Credit: 1.5 Billion
Solution(s):
We could use the federal EITC eligibility rules for a state EITC program to enable easier implementation and keeps costs down.
Unfortunately, this could leave out the most vulnerable of our communities. We believe the below recommendations will alleviate poverty and saving taxpayers money.
- Lower the state EITC age limit from 25 to 18
- Raise the state EITC age limit from 65 to 67
- Double the amount received for childless workers
How would we finance a state EITC?
- Close corporate loopholes in the state sales tax
- Corporate income tax
- Finance a state EITC with a portion of TANF funds
- Reallocate some of the $800 million used for border security to fund a state EITC
Ideas from the Right A Publication from Conservative Approaches to Tax Credits for Working Families
R Street – One anti-poverty initiative both sides can agree on
BROOKINGS – Earned Income Tax Credit (EITC) Interactive and Resources
BROOKINGS – EITC Expansion Would Strengthen Credit for Childless Workers
IRS – States and Local Governments with Earned Income Tax Credit
CBPP – Policy Basics: State Earned Income Tax Credits
CBPP – Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty
A Renewed Push for Earned Income Tax Credit in States
A Hand Up for Michigan Workers: Michigan’s State Earned Income Tax Credit
An Anti-Poverty Policy that Works for Working Families
AEI – Balancing the trade-offs: Options for expanding the childless worker earned income tax credit
Earned Income Tax Credit vs the Negative Income Tax (basic income)
Princeton – Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence
The California’s Legislature’s Nonpartisan Fiscal and Policy Advisor – Options for a State EITC
R Street Institute – Finding new ways to make work pay
R Street Institute – R Street applauds Rep. Gardner’s Earned Income Tax Credit bill
R Street Institute – The one budget proposal worth seizing
Rand Paul Exaggerates Tax Credit Fraud
Washington State Budget and Policy Center – The Working Families Tax Rebate
Washington State – The only state without an income tax to have an EITC
The Seattle Times – Inslee seeks tax rebate for low-income families
Colorado Earned Income Tax Credit (EITC)
NCSL – Tax Credits for Working Families: Earned Income Tax Credit (EITC)
NBER – Behavioral Responses to Taxes: Lessons from the EITC and Labor Supply
NBER – Income, the Earned Income Tax Credit, and Infant Health
National Review – What EITC Recipients Know about the Program — and What That Suggests about Reform
Charleston Gazette – Matthew Rohrbach: Tax credit path to middle class
New York Times – Oklahoma makes the poor poorer
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