Posted tagged ‘child tax credit’

EITC boost would help families who need it — and economy

January 17, 2013
Heather Gibney, Research Associate

Heather Gibney

If you imagine a packed Kinnick Stadium on game day you have an idea of how many Iowans were kept out of poverty from 2009 to 2011 thanks to two refundable tax credits.

A new state-by-state analysis from the Brookings Institution finds that the federal Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) kept 71,123 Iowans out of poverty, over half of them children.

The Governor’s Condition of the State speech Tuesday missed an opportunity to discuss the value of Iowa’s own Earned Income Tax Credit (EITC) to Iowa families and prospects for an expansion — something he has twice vetoed on grounds that he wanted more comprehensive tax reforms.

The Brookings analysis uses a new way of looking at poverty: the Supplemental Poverty Measure, an updated approach to the calculation of whether an Americans household is in poverty. So it’s a valuable look that we haven’t seen for state-level figures.

The EITC is designed to encourage work when low-income jobs don’t provide enough for a family to make ends meet. So, as a family earns more income, they become eligible for a larger credit; as their income approaches self-sufficiency the EITC gradually phases out.[1]

At the state level, Iowa families who are eligible for the federal EITC also qualify for the state EITC, which is set at 7 percent of the federal credit. Proposals in the past would take that higher, to 10 percent or even 20 percent. It can be an important break for lower-income working families because Iowa already taxes the income of many who don’t earn enough to pay federal income tax. Currently, a married couple with two incomes and two children who qualifies for the federal EITC doesn’t have to start paying federal income taxes until their incomes reach $45,400. That same family would have to pay Iowa income taxes when their incomes reached $22,600.[2]

The EITC is the the nation’s largest and most successful anti-poverty program, largely because it encourages and rewards working families. With Iowa’s 85th General Assembly under way, discussions about raising Iowa’s EITC above 7 percent may once again emerge after lawmakers failed to reach an agreement last year.

An EITC increase would raise the threshold at which Iowa families start to owe income taxes — putting more money into the pockets of those who need it the most and encouraging them to spend that money in their local communities.

Posted by Heather Gibney, Research Associate


Federal stimulus impacts on Iowa

February 20, 2009

Here is a look at some of the impacts of the American Recovery & Reinvestment Act in Iowa:

FMAP (Medicaid percentage increase) FY2009-11 — $550.0 million

State Fiscal Stabilization (Flexible block grant) — $ 86.0 million

Education/ Child Care:

State Fiscal Stabilization fund (education) FY2009-10$386.4 million

Title 1 (supplemental support) — $65.3 million

IDEA (special education state grants)—$120.9 million

Child Care & Development Block Grant FY2009-10 — $18.1 million

Child Support FY2009-10 — $27.2 million

Unemployment Insurance (UI):

UI Benefit Increase ($25/week) — 212,422 recipients

UI Emergency Extension to 12/09 — 27,600 new beneficiaries

Employment Services FY09:

Youth Services — $5.2 million

Dislocated Workers — $6.3 million

Adult Activities — $1.6 million

Making Work Pay Credit — 1,110,000 taxpayers

Food Stamps FY2009-13:

Benefit Increase — $161 million and 279,000 recipients

Administration — $2.7 million

Child Tax Credit (tax year 2009 — lowers threshold to make credit available to families at $3,000 earnings):

Number helped lowering $8,500 threshold — 133,000

Number helped lowering $12,550 threshold — 156,000

Emergency Shelter Grant Pgm FY091 Add’l Funds — $16.8 million and 4,500 households


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