Report: EITC Taking Shape Around Country

A plan to extend the Earned Income Tax Credit in Arkansas failed in the last legislative session, but the idea has seen support in other states, according to a national group.

The Pew Charitable Trusts released a report last week titled “With More Money, States Weigh Expanded Tax Credits for Working Families.”

The report mentioned that several states including California, Massachusetts and New Jersey have pushed for the idea.

“With the Great Recession in the rearview mirror for most states, several of them are enacting or enhancing the tax credit to help working families, especially, benefit at least a little from better financial times. Low-income earners are most likely to lag as the economy improves, and the EITC has proven to be a reliable source of help,” the report noted.

“The EITC lowers the income tax bill of moderate- and low-income workers, boosting the amount of dollars they can spend on other things. Unlike an income tax deduction, it sometimes puts extra money in people’s pockets. It’s been a popular, bipartisan fixture of federal tax policy since its adoption in 1975 and has been copied in many states.”

“Liberals like it because it helps poor people narrow the income inequality gap. Conservatives like it because it rewards work,” the Pew report said.

The report noted that the states often set the Earned Income Tax Credit as a percentage of the federal EITC.

In the last legislative session, Rep. Warwick Sabin, D-Little Rock, attempted to enact an EITC state-level bill. His measure would have provided tax relief to approximately 279,000 Arkansans who receive the federal Earned Income Tax Credit (EITC) each year with an additional 1.25 percent of their federal credit amount in 2016, 2.5 percent in 2017, and 5 percent by 2018.

Sabin said he wants to continue pressing the issue.

“I am continuing to work with my legislative colleagues in a bi-partisan fashion to find a way to enact a state EITC in Arkansas as soon as possible. As lawmakers on both sides of the aisle learn more about the advantages of an EITC and the positive impacts it is having in other states, there is growing consensus that we need to make this happen here,” Sabin said. “It is a wise use of resources because it rewards work and moves people more quickly toward financial independence, so that they are stimulating the economy and contributing to growth.”