State-Level Tax Credits Among “Smart Policy Choices” Highlighted in New Report on Financial Security
February 7, 2018Print
By Devin Simpson
State lawmakers who want to improve the financial security and overall well-being of their constituents should look to tax credits for working families, according to a new report.
The 2018 Prosperity Now Scorecard finds that despite recent economic growth, millions of working families are still struggling to make ends meet. The report argues that many state lawmakers’ poor policy decisions have fueled financial insecurity for all but the wealthiest Americans. Each year, the Scorecard assesses financial health across all 50 states and the District of Columbia and offers a set of policy solutions.
Among those solutions are income-boosting measures such as enacting or expanding state-level tax credits. State-level Earned Income Tax Credits (EITCs), Child Tax Credits and Child and Dependent Care Credits build off of their federal counterparts to help working families cover major expenses, save for unexpected emergencies and pay off debt. Hawaii, Montana and South Carolina enacted new state-level EITCs in 2017, while California and Illinois expanded their existing credits. The report highlights South Carolina’s EITC victory and encourages policymakers to make the credit refundable to reach more low-income working families.
States that offer their own version of federal tax credits for working families tend to rank higher in the Scorecard than states that do not. Currently, 29 states have a state-level EITC, 12 of which are refundable and worth at least 15 percent of the federal credit. The report recommends more states consider following suit as a part of a broader policy agenda that gives working Americans the ability to save, get ahead and prosper.
To view the full list of state rankings and other Scorecard findings, click here.