Together, the federal Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) keep more than five million children out of poverty. The federal EITC alone kept 3.3 million children above the poverty line in 2009. Together, these federal credits typically provide enough to help parents make a mortgage or rent payment or buy several months of groceries.
Twenty-five states have gone one step further by establishing a state EITC, because it encourages work among low-income families, reduces poverty, and stimulates local economies. Implementing a state EITC in Kentucky could help thousands of low-income families and, in turn, our local businesses and our economy.
A State Earned Income Tax Credit Would Help Kentucky Families and Local Economies
The recent economic recession has made it harder for many hard working Kentucky families to make ends meet. This has a devastating ripple effect in our communities with families unable to pay bills like rent and utilities and unable to purchase necessities like food, clothing, and car repairs. The EITC directly benefits families by helping cover the costs of basic needs. Many families who are working, often at more than one job, have low wages. This often means they don’t earn enough to meet their daily living expenses or access routine health care, much less save for things like increasing their education. These families tend to use the refunds on housing, groceries, childcare, transportation and health care costs. In 2008, over 379,000 Kentucky taxpayers claimed the federal EITC worth $760 million.
A family earning less than $49,078 in 2011 could receive a credit up to $5,751 in federal EITC refunds. EITC eligibility makes many firefighters, nurses and child care providers eligible.
A refundable state EITC would begin paying benefits quickly – with little administrative cost and without requiring the creation of more governmental infrastructure. By implementing an EITC in Kentucky, thousands of low-income working families would have additional funds to address their immediate needs and, in some cases, a few extra dollars to save for achieving long-term economic stability. As parents work more and spend their EITC in local communities, a state EITC would strengthen local economies as well.
Issue Brief on the need for a state EITC in Kentucky, click here.
Congress: Don’t Raise Taxes on 5.5 Million Children
With child poverty at a 20-year high, the Child Tax Credit is a lifeline to many kids, covering necessities such as rent, food, and clothes. But the U.S. House of Representatives has passed budget legislation that would deny the credit to 5.5 million children (four out of five of whom are U.S. citizens) living in immigrant families, taking $1,800 a year from families with average incomes of only $21,000. The same House budget process has also produced legislation to cut child care and child abuse prevention and response.
At a time when more than one-in-four Kentucky children live in poverty, government shouldn't be making it harder for any parent to meet their children's basic needs. For more details on the House budget's threats to kids, read the First Focus fact sheet.