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States Improving Tax Credits for Working Families

Six of the 29 states (plus the District of Columbia and Puerto Rico) with Earned Income Tax Credits (EITCs) are expanding them this year, which will help low-paid workers and their families meet basic needs. (See map.) These expansions will supplement the federal EITC’s well-documented, long-term benefits for children, improve racial and gender equity, and boost the nation’s economic prospects. These state actions come as four senators have proposed, and 42 others have signed onto, a major expansion of the federal EITC, which would help 46 million households and lower child poverty.

The following states expanded EITCs in 2019:

  • California’s $600 million-a-year EITC expansion provides an extra $1,000 credit for each eligible family with at least one child under age 6, raises the income limit to $30,000 so a full-time worker at the state’s minimum wage (which will rise to $15 by 2022) can qualify, and raises the credit for many families now receiving a smaller credit. This expansion will enable 1 million more families to receive the credit. The state will pay for it by conforming to parts of the 2017 federal tax law.
  • Maine raised the state’s credit from 5 percent of the federal EITC to 12 percent for families with children in the home, and to 25 percent of the federal EITC for families without children in the home, who receive a much smaller federal credit. Also, young workers aged 18 to 24 who are not raising children in the home can now claim the credit, which will help 16,000 young Mainers.
  • Minnesota doubled the maximum credit for workers without children in the home and raised the income limit for those workers. Families with three or more children will receive a larger credit (previously they received the same credit as families with two children) and families with one or two children will see a small increase. An estimated 275,000 households will benefit, including 30,000 households that can receive the credit for the first time.
  • New Mexico raised its credit from 10 percent of the federal EITC to 17 percent for the 200,000 families receiving it.
  • Ohio raised its credit from 10 percent of the federal EITC to 30 percent and removed a cap on the credit that no other state had. But Ohio’s EITC is still non-refundable, meaning it leaves out the lowest-earning families because they earn too little to owe income tax — even though they pay a higher share of their income in state and local taxes than the wealthiest Ohioans, on average.
  • Oregon lawmakers raised the state’s credit from 8 percent of the federal EITC to 9 percent, and from 11 to 12 percent for families with a child under age 3. Governor Kate Brown is expected to sign this law, which would help 250,000 families.

Some states strengthened other tax credits that help families earning low wages make ends meet. Arizona and Illinois created a new Child Tax Credit worth $100 per family (Illinois’ requires voter approval). And Maryland made its Child and Dependent Care Credit refundable for families with incomes of $50,000 or less ($75,000 for married filers) and increased the credit amount and income limits, enabling an estimated 90,000 more families to qualify.