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Rewarding Work Through the Tax Code Center on Urban and Metropolitan Policy Alan Berube, Senior Research Analyst The Brookings Institution Maximizing Income.

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Presentation on theme: "Rewarding Work Through the Tax Code Center on Urban and Metropolitan Policy Alan Berube, Senior Research Analyst The Brookings Institution Maximizing Income."— Presentation transcript:

1 Rewarding Work Through the Tax Code Center on Urban and Metropolitan Policy Alan Berube, Senior Research Analyst The Brookings Institution Maximizing Income and Assets to Help Low-Income Workers NGA Webcast July 9, 2003

2 How the EITC Works

3 EITC and CTC Are Large Sources of Support for Low-Income Families Projected Federal Expenditures, FY 2004 EITC CTCFood Stamps TANF

4 EITC Receipt is often as High in Rural Areas as in Cities Georgia, TY 2000

5 < 5% 5% to 10% 10% to 15% 15% to 20% > 20% At Least 15 Percent of Eligible EITC Recipients Miss Out on the Credit Percentage of Eligible EITC Recipients Failing to File Taxes, TY 1996

6 Too Many EITC Recipients End Up with Expensive “Rapid Refund” Loans Percentage of EITC Recipients Purchasing Refund Loans, TY 1999 < 20% 20% to 30% 30% to 40% 40% to 50% > 50%

7 A Growing Number of States Are Adopting State-Level EITCs States with and without State EITCs, 2003 No State EITC No State Income Tax Refundable State EITC Nonrefundable State EITC

8 How States Can Leverage Tax Credits for Low-Income Families 1. Ensure that low-income families know about the EITC and CTC Examples: Delaware, Washington 2. Support community organizations that provide free or low-cost tax preparation; enact tougher disclosure on “refund loans” Examples: Illinois, Minnesota 3. Enact or expand state EITCs to help low-income families cope with other tax hikes or service cuts Examples: New York, Indiana


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