April 8, 2004

STATE INCOME TAX BURDENS ON LOW-INCOME FAMILIES IN 2003
by Bob Zahradnik and Joseph Llobrera[1]

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State Fact Sheets

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Summary

Poor families in many states continue to face a substantial burden as they file personal income taxes for the 2003 tax year.  In a large number of the states that levy income taxes — in 18 out of 42 states — two-parent families of four with incomes below the federal poverty line continue to owe income tax.  In 16 of those states, poor single-parent families of three also pay income taxes.  In addition, 30 of the 42 states with an income tax still tax families with incomes just above the poverty line, even though such families typically have difficulty making ends meet.

In some states, families with poverty-level incomes face income tax bills of several hundred dollars.  For instance, a two-parent family of four in Kentucky with income of $18,811 — the 2003 poverty line for a family that size — owes $626 in income tax, the highest tax on such a family in the country.  A single-parent family of three in Kentucky with poverty-level income of $14,675 owes $383, second only to the tax on such a family levied in Alabama of $413.  Such amounts can make a big difference to a struggling family.  Other states levying tax of $200 or more on families with poverty-level incomes include Arkansas, Hawaii, Indiana, Michigan, Montana, Oregon, Virginia, and West Virginia.

Taxing the incomes of working-poor families runs counter to the efforts by policymakers across the political spectrum to provide more assistance to families seeking to work their way out of poverty.  Many states reduced income taxes on the poor in the 1990s, and a narrow majority of states now exempt poor families from the income tax.  The federal government has exempted such families since the mid-1980s.

Eliminating all or most state income taxes on working families with poverty-level incomes gives a boost in take-home pay that helps offset higher child care and transportation costs that families incur as they strive to become economically self-sufficient.  In other words, relieving state income tax burdens on poor families is making a meaningful contribution toward "making work pay.@  A dozen states go even further; they not only exempt poor families from income taxation, but also provide a tax rebate that can help such families meet their expenses.

Methodology

This report takes into account income tax provisions that are broadly available to low-income families and that are not intended to offset some other tax. It does not take into account tax credits or deductions that benefit only families with certain expenses, nor does it take into account provisions that are intended explicitly to offset the burden of a tax other than the income tax. For instance, it does not include the impact of tax provisions that are available only to families with out-of-pocket child care expenses or specific housing costs, because not all families face such costs. It also does not take into account sales tax credits, property tax "circuitbreakers," and similar provisions, because this analysis does not attempt to gauge the burdens of those taxes C only of income taxes. Moreover, such provisions tend to be quite modest and in most cases do not affect greatly tax burdens on low-income families

States that choose to reduce or eliminate tax burdens on low-income families employ a variety of mechanisms to do so.  These mechanisms include state Earned Income Tax Credits (EITCs) and other low-income tax credits; no-tax floors; and personal exemptions and standard deductions that are adequate to shield poverty-level income from taxation.

Despite the economic slowdown and the associated state fiscal crisis, states are continuing to make some progress in the income-tax treatment of low-income families.  In 2003, the average state income tax threshold increased slightly relative to the poverty line, largely because Indiana enacted a new state EITC that reduced taxes on a family of four at the poverty line by nearly $200.  Illinois improved the tax treatment of low-income families by making its EITC fully refundable.  As result, in 2003 an Illinois family of four with minimum-wage earnings (which falls more than $8,000 below the poverty line) received a $129 refund to help meet work related expenses.  Rhode Island made a small portion of its EITC refundable, allowing a single-parent family of three with income at the poverty line to receive a $50 refund.

In a few states, the tax burden on poor families has increased over the last decade.  In Alabama, Arkansas, Iowa, Kentucky, Louisiana, Virginia, and West Virginia, the income taxes on families of four with poverty-level incomes have risen since 1994, even after taking inflation into account.  The increase after the adjustment for inflation has been as much as 53 percent in Louisiana, 49 percent in Virginia, and 45 percent in Arkansas.  In each of these states, the reason for the tax increase is that personal exemptions, credits, or other features of the tax code designed to protect the incomes of low-income families from taxation have eroded due to inflation.

 

Many States Continue to Levy Substantial Income Taxes on Poor Families in 2003

This analysis assesses the impact of each state=s income tax in 2003 on poor and near-poor families with children.[2]  (Forty-two states, counting the District of Columbia as a state, levy income taxes.)  One important measure of tax burdens on poor families is the income tax threshold — the point at which, as a family=s income rises, it first begins to owe income tax.  Tables 1A and 1B show the thresholds for a single parent with two children and for a married couple with two children, respectively.

Comparing Income Tax Thresholds in Poor States with Those in Wealthier States

Relieving income taxes on poor families can be a greater challenge for states with low median incomes and higher poverty rates than it is for wealthier states, because poorer states generally have more potential beneficiaries of such tax relief and a smaller overall tax base to absorb the loss of revenue. Yet both high-income states and low-income states have been able to exempt poor families from the income tax. In fact, of the 26 states that exempt from taxation the income of a single-parent family of three with income at or below the poverty line, 12 have median incomes below the U.S. median, including three of the nation's 10 poorest states: New Mexico, North Dakota and Oklahoma.

 

Taxes on Poor Families

Where states tax the wages of poor families, those tax burdens can be several hundred dollars — a substantial amount for a struggling family.  These amounts are shown in Tables 2A, 2B, 3A and 3B.

Why Focus on Income Taxes When Other Taxes Are
More Burdensome for Poor Families?

In most states, poor families pay more in consumption taxes such as gasoline, sales, and other taxes than they do in income taxes. Property taxes and other taxes and fees also impose substantial burdens on poor families. Nonetheless, income tax burdens on poor families are significant for two primary reasons. First, it is administratively easier for states to target income tax relief to poor families than it is to provide sales or property tax relief to those families; the great majority of the low-income tax relief enacted in the last decade at the state level has been administered through the income tax. Second, policymakers are often concerned about the negative message that high taxes on earnings send to families trying to work their way out of poverty.

States that rely heavily on income taxes for revenue still can exempt poor families from taxation. Of the 10 states that receive their largest share of state tax revenue from personal income taxes, seven — California, Colorado, Maryland, Massachusetts, New York, Virginia and Wisconsin — exempt poor families of three or four from the income tax.

Taxes on Near-poor Families

Many families with earnings just above the poverty line continue to find it difficult to make ends meet.  Federal and state governments recognize the challenges faced by families with incomes slightly above the poverty line and have set eligibility for some assistance programs, such as energy assistance, school lunch subsidies, and in many states health care subsidies, at 125 percent of the poverty line ($18,344 for a family of three, $23,514 for a family of four) or above.

A majority of states, however, continue to levy income tax on families with incomes at 125 percent of the poverty line.  Some 30 states, for instance, tax the incomes of such families of four, with the tax bill exceeding $500 in eight states — Alabama, Arkansas, Hawaii, Iowa, Kentucky, Oregon, Virginia, and West Virginia.  Some 25 states tax the incomes of families of three with income at 125 percent of the poverty line.  See tables 4A and 4B.

 

Modest Improvement in Income Tax Thresholds Since Last Year

States made modest progress in the 2003 tax year in reducing taxes on poor families.

The most significant improvement in the income-tax treatment of poor families was registered in Indiana, where a new state Earned Income Tax Credit raised the income tax threshold for a family of four from $9,500 to $14,400 and cut the tax for a family at the poverty line from $387 to $201.  The new Indiana credit increases the income tax threshold for a family of three from $9,000 to $13,400 and cut the tax for such a family from $284 to $55.

 

Most but Not All States Have Made Substantial Progress since the Early 1990s

Over the last decade, states generally have improved their tax treatment of working poor families.  From 1991 to 2003, for example, the number of states levying income tax on poor families of four declined from 24 to 18.  And among those remaining 18 states, many reduced taxes on poor families.  From 1994 to 2003 the average income tax for a family of four at the poverty line fell by about 15 percent in inflation-adjusted terms.  Tables 5 and 6 show changes over time.

States have used a variety of mechanisms to reduce income taxes on poor families.  Nearly all states offer personal exemptions and/or standard deductions, which reduce the amount of income subject to taxation for all families including those with low incomes; in a number of states, these provisions by themselves are sufficient to lift the income tax threshold above the poverty line.  In addition, many states have enacted provisions targeted to low- and moderate-income families.  In 2003 some 16 states offered Earned Income Tax Credits based on the federal EITC, which are tax credits for working-poor families, mostly those with children.[3]  Other states offer other types of low-income tax credits, such as New Mexico's "Low-Income Comprehensive Tax Rebate."  Finally, a few states have "no-tax floors," which set a dollar level below which families owe no tax but do not affect tax liability for families above that level.

Future Changes in Income Tax Thresholds

This report shows income tax thresholds for tax year 2003. As a part of legislation enacted in 2003 and in previous years, some states have adopted changes to their income tax systems that will lead to increased thresholds in 2004 and beyond. These changes will not change the number of states that levy income tax on poor families.

  • Colorado statutes provide for a 10 percent refundable EITC in years in which total state revenues exceed a certain limit. The credit is presently suspended due to insufficient revenues, and is projected to be reinstated no earlier than 2005. Reinstatement of the credit will raise the threshold further above the poverty line and improve the income-tax treatment of low- and moderate-income families.
  • Indiana’s 6 percent refundable EITC, which has a significant impact on the threshold and reduces tax burdens up to $250, is set to expire at the end of 2005. If the credit does expire, the threshold for a two-parent family of four will fall from its current level of 77 percent of the poverty line to less than 37 percent of the poverty line.
  • Maryland’s EITC will increase from 18 percent to 20 percent in 2004. Maryland’s tax threshold is already above the poverty line, and this change will further improve the income-tax treatment of low- and moderate-income families.
  • North Carolina's standard deduction for married couples will increase by $500 in 2004. The change will not lift North Carolina's threshold above the poverty line
  • Changes in the federal Earned Income Tax Credit enacted in June 2001 will increase thresholds in those states that piggyback on the federal credit. The EITC increase took effect in tax year 2002, with additional increases scheduled for 2005 and 2008. Some 17 states piggyback on the federal EITC.

 

A Few States Tax the Incomes of the Poor More Heavily than in the Early 1990s

A smaller number of states stand out for their lack of progress over the last dozen years in reducing income tax burdens on the poor.

Over the last ten years, the Alabama tax burden on families with poverty-level incomes has risen.  The income tax on a family of four with income at the poverty line in 2003 is $493, compared with $348 eight years ago — a 14 percent increase after adjusting for inflation.

State Fact Sheets

 

Table 1A
State Income Tax Thresholds for Single-Parent Families of Three, 2003

Poverty Line (estimated): $14,675

Rank

State

Threshold

 

Rank

State

Threshold

1

Alabama

4,600

 

17

Delaware

$14,700

2

Kentucky

5,000

 

18

Virginia

15,300

3

Montana

8,300

 

19

Oklahoma

15,600

4

Hawaii

9,800

 

20

Colorado

16,200

5

West Virginia

10,000

 

20

Idaho

16,200

6

Ohio

10,300

 

20

Utah

16,200

7

Michigan

10,500

 

23

Nebraska

16,400

8

Louisiana

11,000

 

24

North Dakota

16,600

9

Georgia

12,700

 

25

Iowa

17,700

10

Arkansas

13,000

 

26

New Mexico

19,000

10

Illinois

13,000

 

27

Connecticut

19,100

10

Missouri

13,000

 

28

South Carolina

19,200

13

Indiana

13,400

 

29

Wisconsin

19,400

14

Oregon

13,500

 

30

New Jersey

20,000

15

Mississippi

14,400

 

31

Arizona

20,100

15

North Carolina

14,400

 

32

District of Columbia

20,300

 

 

 

 

33

Maine

21,800

 

 

 

 

34

Massachusetts

22,600

 

 

 

 

35

Kansas

23,100

 

 

 

 

36

Pennsylvania

24,500

 

 

 

 

37

New York

25,400

 

 

 

 

38

Rhode Island

26,400

 

 

 

 

39

Maryland

27,100

 

 

 

 

40

Vermont

27,600

 

 

 

 

41

Minnesota

27,700

 

 

 

 

42

California

38,200

 

 

 

 

 

 

 

Average Threshold 2003

$11,100

 

Average Threshold 2003

$21,000

Amount Below Poverty

$3,575

 

Amount Above Poverty

$6,325

Note: A threshold is the lowest income level at which a family has state income tax liability.
In this table thresholds are rounded to the nearest $100. The 2003 poverty line is a Census Bureau estimate based on the actual 2002 line adjusted for inflation.  The threshold calculations include earned income tax credits, other general tax credits, exemptions, and standard deductions. Credits that are intended to offset the effects of taxes other than the income tax or that are not available to all low-income families are not taken into account.
Source: Center on Budget and Policy Priorities

 

Table 1B
State Income Tax Thresholds for Two-Parent Families of Four, 2003
Poverty Line (estimated): $18,811

Rank

State

Threshold

 

Rank

State

Threshold

1

Alabama

4,600

 

19

Mississippi

$19,600

2

Kentucky

5,500

 

20

New Jersey

20,000

3

West Virginia

10,000

 

21

Delaware

20,300

4

Montana

10,100

 

22

District of Columbia

20,700

5

Hawaii

11,500

 

23

Colorado

21,700

6

Ohio

13,000

 

23

Nebraska

21,700

7

Michigan

13,600

 

23

Utah

21,700

8

Indiana

14,400

 

26

Idaho

21,800

9

Illinois

15,000

 

27

New Mexico

22,000

10

Arkansas

15,500

 

28

North Dakota

22,200

11

Louisiana

15,600

 

29

Wisconsin

23,000

12

Georgia

15,900

 

30

South Carolina

23,200

13

Oregon

16,000

 

31

Arizona

23,600

14

Missouri

16,200

 

32

Massachusetts

24,000

15

Oklahoma

16,600

 

33

Connecticut

24,100

16

Iowa

17,900

 

34

Kansas

24,400

17

North Carolina

18,000

 

35

Maine

24,600

18

Virginia

18,400

 

36

New York

27,700

 

 

 

 

37

Maryland

28,500

 

 

 

 

38

Rhode Island

28,700

 

 

 

 

39

Minnesota

30,200

 

 

 

 

39

Vermont

30,200

 

 

 

 

41

Pennsylvania

31,000

 

 

 

 

42

California

40,200

 

 

 

 

 

 

 

Average Threshold 2003

$13,800

 

Average Threshold 2003

$24,800

Amount Below Poverty

$5,011

 

Amount Above Poverty

$5,989

Note: A threshold is the lowest income level at which a family has state income tax liability. In this table thresholds are rounded to the nearest $100. The 2003 poverty line is a Census Bureau estimate based on the actual 2002 line adjusted for inflation. The threshold calculations include earned income tax credits, other general tax credits, exemptions, and standard deductions. Credits that are intended to offset the effects of taxes other than the income tax or that are not available to all low-income families are not taken into account.
Source: Center on Budget and Policy Priorities

 

Table 2A
State Income Tax at Poverty Line for Single-Parent Families of Three, 2003

 

State

Income

Tax 

 

1

Alabama

$14,675

$413

 

2

Kentucky

14,675

383

 

3

Hawaii

14,675

279

 

4

West Virginia

14,675

260

 

5

Montana

14,675

189

 

6

Michigan

14,675

167

 

7

Louisiana

14,675

115

 

8

Oregon

14,675

93

 

9

Ohio

14,675

79

 

10

Illinois

14,675

60

 

11

Indiana

14,675

55

 

12

Georgia

14,675

45

 

13

Arkansas

14,675

31

 

14

Missouri

14,675

30

 

15

North Carolina

14,675

17

 

16

Mississippi

14,675

8

 

17

Arizona

14,675

0

 

17

California

14,675

0

 

17

Colorado

14,675

0

 

17

Connecticut

14,675

0

 

17

Delaware

14,675

0

 

17

Idaho*

14,675

0

 

17

Iowa

14,675

0

 

17

Maine

14,675

0

 

17

Nebraska

14,675

0

 

17

North Dakota

14,675

0

 

17

Pennsylvania

14,675

0

 

17

South Carolina

14,675

0

 

17

Utah

14,675

0

 

17

Virginia

14,675

0

 

31

Oklahoma

14,675

(45)

 

32

Rhode Island

14,675

(50)

 

33

New Mexico

14,675

(75)

 

34

Wisconsin

14,675

(407)

 

35

Kansas

14,675

(560)

 

36

Maryland

14,675

(561)

 

37

Massachusetts

14,675

(601)

 

38

District of Columbia

14,675

(642)

 

39

New Jersey

14,675

(801)

 

40

Minnesota

14,675

(1,052)

 

41

New York

14,675

(1,115)

 

42

Vermont

14,675

(1,282)

 

* Idaho's threshold is greater than the poverty line, but there is a $10 building fund.
Source: Center on Budget and Policy Priorities

 

Table 2B
State Income Tax at Poverty Line for Two-Parent Families of Four, 2003

 

State

Income

Tax 

 

1

Kentucky

$18,811

$626

 

2

Alabama

18,811

493

 

3

Hawaii

18,811

407

 

4

Virginia

18,811

401

 

5

Arkansas

18,811

386

 

6

West Virginia

18,811

334

 

7

Oregon

18,811

279

 

8

Montana

18,811

251

 

9

Michigan

18,811

208

 

10

Indiana

18,811

201

 

11

Louisiana

18,811

158

 

12

Illinois

18,811

157

 

13

Oklahoma

18,811

119

 

14

Ohio

18,811

116

 

15

Iowa

18,811

100

 

16

Georgia

18,811

73

 

17

Missouri

18,811

54

 

18

North Carolina

18,811

50

 

19

Arizona

18,811

0

 

19

California

18,811

0

 

19

Colorado

18,811

0

 

19

Connecticut

18,811

0

 

19

Delaware

18,811

0

 

19

Idaho*

18,811

0

 

19

Maine

18,811

0

 

19

Mississippi

18,811

0

 

19

Nebraska

18,811

0

 

19

North Dakota

18,811

0

 

19

Pennsylvania

18,811

0

 

19

South Carolina

18,811

0

 

19

Utah

18,811

0

 

32

Rhode Island

18,811

(42)

 

33

New Mexico

18,811

(60)

 

34

District of Columbia

18,811

(237)

 

35

Maryland

18,811

(358)

 

36

Kansas

18,811

(367)

 

37

Wisconsin

18,811

(373)

 

38

Massachusetts

18,811

(418)

 

39

New Jersey

18,811

(668)

 

40

New York

18,811

(914)

 

41

Vermont

18,811

(1,069)

 

42

Minnesota

18,811

(1,472)

 

* Idaho's threshold is greater than the poverty line, but there is a $10 building fund.
Source: Center on Budget and Policy Priorities

 

Table 3A
State Income Tax at Minimum Wage for Single-Parent Families of Three, 2003
  State Income* Tax    
1 Alabama $10,712 $218  
2 Kentucky 10,712 203  
3 Hawaii** 13,000 185  
4 West Virginia 10,712 143  
5 Oregon** 14,352 69  
6 Montana 10,712 50  
7 Michigan 10,712 8  
8 Ohio 10,712 6  
9 Arizona 10,712 0  
9 Arkansas 10,712 0  
9 California** 14,040 0  
9 Colorado 10,712 0  
9 Connecticut** 14,352 0  
9 Delaware** 12,792 0  
9 Idaho*** 10,712 0  
9 Iowa 10,712 0  
9 Louisiana 10,712 0  
9 Maine** 13,000 0  
9 Mississippi 10,712 0  
9 Missouri 10,712 0  
9 Nebraska 10,712 0  
9 North Carolina 10,712 0  
9 North Dakota 10,712 0  
9 Pennsylvania 10,712 0  
9 South Carolina 10,712 0  
9 Utah 10,712 0  
9 Virginia 10,712 0  
28 Georgia 10,712 (24)  
29 Rhode Island** 12,792 (53)  
30 Illinois 10,712 (69)  
31 Indiana 10,712 (92)  
32 New Mexico 10,712 (100)  
33 Oklahoma 10,712 (148)  
34 Wisconsin 10,712 (589)  
35 Massachusetts** 14,040 (621)  
36 Kansas 10,712 (631)  
37 Maryland 10,712 (746)  
38 District of Columbia** 12,792 (785)  
39 New Jersey 10,712 (841)  
40 Minnesota 10,712 (1,052)  
41 New York 10,712 (1,261)  
42 Vermont** 13,000 (1,345)  
*Income reflects full-time, year-round minimum wage earnings for one worker (52 weeks, 40 hours/ week)
**These ten states had a minimum wage higher than the federal minimum wage in all or part of 2003.
***Idaho's threshold is greater than the poverty line, but there is a $10 building fund.
Source: Center on Budget and Policy Priorities

 

Table 3B
State Income Tax at Minimum Wage for Two-Parent Families of Four, 2003
  State Income* Tax    
1 Alabama $10,712 $218  
2 Kentucky 10,712 203  
3 Hawaii** 13,000 185  
4 West Virginia 10,712 143  
5 Oregon** 14,352 69  
6 Montana 10,712 50  
7 Michigan 10,712 8  
8 Ohio 10,712 6  
9 Arizona 10,712 0  
9 Arkansas 10,712 0  
9 California** 14,040 0  
9 Colorado 10,712 0  
9 Connecticut** 14,352 0  
9 Delaware** 12,792 0  
9 Idaho*** 10,712 0  
9 Iowa 10,712 0  
9 Louisiana 10,712 0  
9 Maine** 13,000 0  
9 Mississippi 10,712 0  
9 Missouri 10,712 0  
9 Nebraska 10,712 0  
9 North Carolina 10,712 0  
9 North Dakota 10,712 0  
9 Pennsylvania 10,712 0  
9 South Carolina 10,712 0  
9 Utah 10,712 0  
9 Virginia 10,712 0  
28 Georgia 10,712 (24)  
29 Rhode Island** 12,792 (53)  
30 Illinois 10,712 (69)  
31 Indiana 10,712 (92)  
32 New Mexico 10,712 (100)  
33 Oklahoma 10,712 (148)  
34 Wisconsin 10,712 (589)  
35 Massachusetts** 14,040 (621)  
36 Kansas 10,712 (631)  
37 Maryland 10,712 (746)  
38 District of Columbia** 12,792 (785)  
39 New Jersey 10,712 (841)  
40 Minnesota 10,712 (1,052)  
41 New York 10,712 (1,261)  
42 Vermont** 13,000 (1,345)  
*Income reflects full-time, year-round minimum wage earnings for one worker (52 weeks, 40 hours/ week).
**These ten states had a minimum wage higher than the federal minimum wage in all or part of 2003.
***Idaho's threshold is greater than the poverty line, but there is a $10 building fund.
Source: Center on Budget and Policy Priorities

 

Table 4A
State Income Tax at 125% of Poverty Line for Single-Parent Families of Three, 2003
  State Income Tax    
1 Kentucky $18,344 $623  
2 Alabama 18,344 598  
3 Hawaii 18,344 539  
4 Virginia 18,344 517  
5 Arkansas 18,344 455  
6 Oregon 18,344 450  
7 West Virginia 18,344 394  
8 Michigan 18,344 314  
9 Montana 18,344 312  
10 Louisiana 18,344 265  
11 North Carolina 18,344 236  
12 Indiana 18,344 226  
13 Illinois 18,344 209  
14 Georgia 18,344 192  
15 Ohio 18,344 187  
16 Delaware 18,344 175  
17 Oklahoma 18,344 149  
18 Missouri 18,344 143  
19 Utah 18,344 140  
20 Mississippi 18,344 118  
21 Colorado 18,344 100  
22 Nebraska 18,344 69  
23 Iowa 18,344 65  
24 North Dakota 18,344 46  
25 Idaho* 18,344 45  
26 Arizona 18,344 0  
26 California 18,344 0  
26 Connecticut 18,344 0  
26 Maine 18,344 0  
26 Pennsylvania 18,344 0  
26 South Carolina 18,344 0  
32 New Mexico 18,344 (13)  
33 Rhode Island 18,344 (36)  
34 Wisconsin 18,344 (97)  
35 District of Columbia 18,344 (243)  
36 Maryland 18,344 (249)  
37 Kansas 18,344 (316)  
38 Massachusetts 18,344 (346)  
39 New Jersey 18,344 (647)  
40 New York 18,344 (738)  
41 Vermont 18,344 (959)  
42 Minnesota 18,344 (1,357)  

*Includes $10 building fund.
Source: Center on Budget and Policy Priorities

 

Table 4B
State Income Tax at 125% of Poverty Line for Two-Parent Families of Four, 2003
  State Income Tax    
1 Kentucky $23,514 $968  
2 Oregon 23,514 752  
3 Hawaii 23,514 718  
3 Alabama 23,514 718  
5 Arkansas 23,514 647  
6 Virginia 23,514 635  
7 Iowa 23,514 570  
8 West Virginia 23,514 522  
9 Montana 23,514 430  
10 Oklahoma 23,514 429  
11 Indiana 23,514 420  
12 Michigan 23,514 397  
13 District of Columbia 23,514 364  
14 Illinois 23,514 348  
15 North Carolina 23,514 332  
16 Georgia 23,514 297  
17 New Jersey 23,514 259  
18 Louisiana 23,514 253  
19 Ohio 23,514 249  
20 Missouri 23,514 233  
21 Delaware 23,514 158  
22 Utah 23,514 156  
23 Nebraska 23,514 120  
24 Mississippi 23,514 117  
25 Colorado 23,514 86  
26 Wisconsin 23,514 50  
27 Idaho* 23,514 39  
28 North Dakota 23,514 38  
29 New Mexico 23,514 31  
30 South Carolina 23,514 8  
31 Arizona 23,514 0  
31 California 23,514 0  
31 Connecticut 23,514 0  
31 Maine 23,514 0  
31 Maryland 23,514 0  
31 Pennsylvania 23,514 0  
37 Rhode Island 23,514 (23)  
38 Massachusetts 23,514 (39)  
39 Kansas 23,514 (55)  
40 New York 23,514 (429)  
41 Vermont 23,514 (686)  
42 Minnesota 23,514 (1,044)  

*Includes $10 building fund.
Source: Center on Budget and Policy Priorities

 

Table 5
Tax Threshold for a Family of Four, 1991-2003
State 1991 1994 1997 2002 2003 Change
1991-2003
Alabama $4,600 $4,600 $4,600 $4,600 $4,600 $0
Arizona 15,000 15,800 20,000 23,600 23,600 8,600
Arkansas 10,700 10,700 10,700 15,600 15,500 4,800
California 20,900 22,600 23,800 39,400 40,200 19,300
Colorado 14,300 16,200 17,500 21,400 21,700 7,400
Connecticut 24,100 24,100 24,100 24,100 24,100 0
Delaware 8,600 8,600 12,700 20,300 20,300 11,700
District of Columbia 14,300 16,200 17,500 20,500 20,700 6,400
Georgia 9,000 11,100 13,100 15,300 15,900 6,900
Hawaii 6,300 6,300 6,100 11,600 11,500 5,200
Idaho 14,300 16,200 17,500 21,500 21,800 7,500
Illinois 4,000 4,000 4,000 14,800 15,000 11,000
Indiana 4,000 4,000 8,500 9,500 14,400 10,400
Iowa 9,000 15,300 16,500 17,800 17,900 8,900
Kansas 13,000 13,000 13,000 24,100 24,400 11,400
Kentucky 5,000 5,000 5,000 5,500 5,500 500
Louisiana 11,000 11,000 12,300 13,900 15,600 4,600
Maine 14,100 14,800 17,500 24,400 24,600 10,500
Maryland 15,800 19,400 22,900 28,100 28,500 12,700
Massachusetts 12,000 12,000 17,400 23,800 24,000 12,000
Michigan 8,400 8,400 10,000 13,200 13,600 5,200
Minnesota 15,500 19,000 21,600 29,300 30,200 14,700
Mississippi 15,900 15,900 15,900 19,600 19,600 3,700
Missouri 8,900 9,700 10,200 14,600 16,200 7,300
Montana 6,600 7,200 8,800 9,900 10,100 3,500
Nebraska 14,300 16,200 17,900 20,100 21,700 7,400
New Jersey 5,000 7,500 7,500 20,000 20,000 15,000
New Mexico 14,300 16,300 17,500 22,000 22,000 7,700
New York 14,000 16,900 22,300 26,800 27,700 13,700
North Carolina 13,000 13,000 17,000 17,000 18,000 5,000
North Dakota 14,700 16,500 18,000 20,300 22,200 7,500
Ohio 10,500 10,500 12,000 12,700 13,000 2,500
Oklahoma 10,000 10,900 12,200 16,500 16,600 6,600
Oregon 10,100 10,900 14,000 15,800 16,000 5,900
Pennsylvania 9,800 15,300 20,600 31,000 31,000 21,200
Rhode Island 17,400 21,100 24,400 28,200 28,700 11,300
South Carolina 14,300 16,800 20,200 22,900 23,200 8,900
Utah 12,200 13,600 14,900 19,900 21,700 9,500
Vermont 17,400 21,100 24,400 29,200 30,200 12,800
Virginia 8,200 8,200 8,200 18,100 18,400 10,200
West Virginia 8,000 8,000 10,000 10,000 10,000 2,000
Wisconsin 14,400 16,400 17,000 22,600 23,000 8,600
Average $11,736 $13,102 $14,983 $19,512 $20,069 $8,333
Federal Poverty Line $13,924 $15,141 $16,400 $18,390 $18,811 $4,887
Average as % poverty 84% 87% 91% 106% 107% +22%
Source: Center on Budget and Policy Priorities

 

Table 6
State Income Tax at the Poverty Line for Families of Four In States with
Below-Poverty Thresholds in 2003
State   1994 2002 2003 Change Percent change after
  94-03 inflation, 94-03*
Louisiana $83 $148 $158 $75 53%
Virginia   217 379 401 184 49%
Arkansas 214 328 386 172 45%
West Virginia 215 314 334 119 25%
Alabama   348 478 493 145 14%
Kentucky 499 606 626 127 1%
Iowa   0 63 100 100 n.a.
Montana   211 244 251 40 -4%
Ohio   107 138 116 9 -13%
Hawaii   406 378 407 1 -19%
Oklahoma 139 98 119 (20) -31%
Oregon   331 267 279 (52) -32%
Michigan   301 213 208 (93) -44%
Georgia   116 76 73 (43) -49%
Indiana   379 387 201 (178) -57%
Illinois   334 145 157 (177) -62%
North Carolina 128 83 50 (78) -69%
Missouri   147 89 54 (93) -70%
     —   —   —   —   — 
Average $232 $246 $245 $13 -15%
Notes: Dollar amounts shown are nominal amounts.
*"Percent change after inflation" shows the percentage change adjusted for the 24.2 percent change in the cost of living from 1994 to 2003 as measured by the Consumer Price Index.

End Notes:

[1] Additional data analysis for this report was provided by Nicholas Johnson, Elizabeth C. McNichol, Michael Mazerov, David Bradley, Andrew Brecher, Thomas Sommer and Peter Bratt.

[2] For a more detailed analysis of the changes that individual states have made to their income taxes affecting low-income families since the early 1990s, the reasons why such changes are important, and the ways other states can implement such changes, see Bob Zahradnik, Nicholas Johnson and Michael Mazerov, State Income Tax Burdens on Low-Income Families in 2000: Assessing the Burden and Opportunities for Relief, Center on Budget and Policy Priorities, March 2001.

[3] The 16 states are the District of Columbia, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oklahoma, Oregon, Rhode Island, Vermont, and Wisconsin.  A 17th state, Colorado, has an EITC that is available only in years in which state revenues exceed a certain limit; the Colorado EITC is suspended for 2003 and 2004.  A full description of current state EITCs and policy issues relating to them may be found in A Hand Up: How State Earned Income Tax Credits Help Working Families Escape Poverty, Center on Budget and Policy Priorities, March 2003.