Earned Income Tax Credit (EITC)

In 2015, Maine, Massachusetts, New Jersey and Rhode Island all acted to expand their EITC programs.

What does it cost?

State EITCs are easy to administer and claim.  States incur virtually no costs for determining eligibility for their credit because in most cases, families eligible for the federal credit also are eligible for the state credit.  And because state credits typically are set at a fixed percentage of the federal credit, state revenue departments need only add one line to a state’s income tax form. State EITCs also offer a good value to states.  Existing refundable EITCs in states with income taxes cost less than 2 percent of state tax revenues each year.

States finance their EITCs in whole or part from their general fund.  Federal regulations allow states to finance the refundable part of a credit going to families with children from a state’s share of the federal Temporary Assistance for Needy Families (TANF) block grant.  Most states, however, have few such funds, because the value of the TANF block grant ¾ which does not adjust for inflation each year ¾ has eroded over time.  No matter how it is financed, an EITC can complement a state’s welfare program by assisting low-income working families with children as they transition from welfare to work.

For more information check out the Center on Budget and Policy Priorities

States with Earned Income Tax Credit

 

The above map, created by the Center on Budget and Policy Priorities, shows the 26 states (included the District of Columbia) that have enacted state EITC programs.

Earned Income Tax Credit Resources