Creating a State Earned Income Tax Credit (EITC)

11 January 2017 Published in New Publications


Even as we strive to ensure that we are investing sufficient resources in laying the foundations for our future prosperity, we must also ensure that no family is taxed into poverty as the price of educating their children.

The federal Earned Income Tax Credit (EITC) already lifts over 70,000 Utahns out of poverty each year, nearly half of them children, by letting low-income families keep more of what they earn.

The EITC reduces poverty responsibly, by encouraging work and reducing welfare dependence for parents. It also produces gains in health and education for their children. That’s why it has always enjoyed such broad political support, from Presidents Reagan and Bush (I and II) to Clinton and Obama. U.S. House Speaker Paul Ryan has proposed expanding it, saying in a 2014 speech at the American Enterprise Institute, “This is one of the few programs that have shown results. It encourages people to work by increasing the rewards of work.”

eitc bipartisan support

How many Utahns now receive the federal EITC?

  • About 195,000 lower-income working households – 18% of all tax filers
  • Utah’s EITC households include 218,500 workers and 291,000 kids

Utah can become the 27th state to create a state EITC, matching the federal credit while using it to encourage saving for future education and advancement.

26 states have a state EITC

(percentages of the federal EITC)

CA – 85% up to half of the fed phase-in range (only W-2 income – self-employment income excluded)

CO – 10% (not yet funded)

CT – 27.5%

DE – 20%

IL – 10%

IN – 9%

IA – 15%

KS – 17%

LA – 3.5%

ME – 5%

MD – 28%

MA – 23%

MI – 6%

MN – 25-45% varies with income

NE – 10%

NJ – 30%

NM – 10%

NY – 30%

OH – 10%

OK – 5%

OR – 8%

RI – 12.5%

VT – 32%

VA – 20%

WA – 10% or $50, whichever is greater (not yet funded)

WI – 1 child 4%; 2 children 11%; 3 children 34%

Utah can target a state EITC to our intergenerational poverty cohort.

The intergenerational poverty cohort includes 57,602 children and 37,512 adults (25% of adults receiving public assistance, 62% of whom worked at least part-time during 2015). A state EITC will help our most at-risk population work their way out of poverty and create a better future for their children.

Utah now has a bill in place to start a state EITC for Utahns in intergernational poverty!  Learn more.

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pdf2017 Children's Fiscal Policy Agenda

Photo Credit: Danielle MacInnes

For 30 years now, Voices for Utah Children has called on our state, federal and local leaders to put children’s needs first. But the work is not done. The children of 30 years ago now have children of their own. Too many of these children are growing up in poverty, without access to healthcare or quality educational opportunities.

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