Credit Where Credit is (Over) Due

Source: Institute on Taxation and Economic Policy (ITEP), September 2010

State tax systems have the potential to play an important role in curbing the impact of poverty and ensuring economic security for all residents. Unfortunately, state tax policy as it is currently structured usually works directly contrary to these goals, and creates an uneven playing field for low-income workers. In most states, truly remedying this unfairness would require fundamental tax reform. Short of this, however, lawmakers can utilize their states’ tax systems as a means of providing affordable and targeted assistance to the growing number of people and families living in poverty. Virtually every state could jump-start their anti-poverty efforts with relatively little effort by enacting one or more of these four proven and effective tax reforms: Refundable state Earned Income Tax Credits, property tax circuit breakers, targeted low-income credits, and child-related tax credits.

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