The Illinois Earned Income Tax Credit
The Illinois Earned Income Tax Credit CFED 2009 Assets & Opportunity Institute
Sean Noble
September 24, 2009
The Illinois EITC – Voices’ support Voices for Illinois Children’s mission: We work across all issue areas to improve the lives of children of all ages throughout our state so they grow up healthy, happy, safe, loved and well-educated. Areas of work: • Education • Health & human services • Family economic security • State fiscal integrity
The Illinois EITC – broad support
Campaign of 43 member organizations, including: Public policy (i.e. Shriver Center on Poverty Law) Tax-preparation (i.e. Centers for Economic Progress) Faith-based (i.e. Protestants for the Common Good) Labor (i.e. United Food & Commercial Workers) Business (i.e. Illinois Retail Merchants Association) Many other statewide, regional, local supporters
The Illinois EITC - basics • Set at 5 percent of federal EITC – making it the nation’s second-smallest • Refundable – families receive its full value • Worth $90.4 million to 848,0000 families
The Illinois EITC - significance $25,000 $20,000 $15,000 $10,000 $5,000 $0 One Parent, Two Children*
Two Parents, Two Children**
Tax Threshold
National ranking in 2006: * 9th lowest; ** 7th lowest
FPL
The Illinois EITC - history
• 2000 – enacted • 2003 – made permanent, refundable • 2007 – administrative kinks fixed
The Illinois EITC – main messages
• Make work pay – and lift families from poverty • Make taxes fairer • Boost the health of local economies
The Illinois EITC – 2 advocacy tracks To increase the credit’s size, advocates are pursuing: • Standalone legislation • Broader revenue-reform context
The Illinois EITC – big-picture context Voices’ “Fairness for Working Families” plan – different tools for different purposes: • Increase state EITC – targeted help for low-income families • Create a state Child Tax Credit – targeted help for families raising kids • Raise the income tax’s standard exemption – helps all, but especially low-income households
The Illinois EITC –big-picture context One example of how this plan could affect the taxes of a family of four, at different income levels, assuming:
$3,500
$3,000
$2,500
Income tax liability
$2,000
$1,500
• 5 % income tax rate
$1,000
• Doubled EITC
$500
• State child tax credit at 33% of federal CTC
$0
-$500
-$1,000 $20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
Earned income CURRENT tax system
ONE APPROACH to fairness plan
$90,000
$100,000
• Standard exemption at 115% of federal exemption
The Illinois EITC – big-picture context House Bill 174 would: • Increase the personal income tax by 2 percentage points • Triple the EITC • Double the personal exemption • Double the property tax credit
For more information, contact: Sean Noble Director of Government Relations www.voices4kids.org 312-516-5566 [email protected]
Sean Noble
September 24, 2009
The Illinois EITC – Voices’ support Voices for Illinois Children’s mission: We work across all issue areas to improve the lives of children of all ages throughout our state so they grow up healthy, happy, safe, loved and well-educated. Areas of work: • Education • Health & human services • Family economic security • State fiscal integrity
The Illinois EITC – broad support
Campaign of 43 member organizations, including: Public policy (i.e. Shriver Center on Poverty Law) Tax-preparation (i.e. Centers for Economic Progress) Faith-based (i.e. Protestants for the Common Good) Labor (i.e. United Food & Commercial Workers) Business (i.e. Illinois Retail Merchants Association) Many other statewide, regional, local supporters
The Illinois EITC - basics • Set at 5 percent of federal EITC – making it the nation’s second-smallest • Refundable – families receive its full value • Worth $90.4 million to 848,0000 families
The Illinois EITC - significance $25,000 $20,000 $15,000 $10,000 $5,000 $0 One Parent, Two Children*
Two Parents, Two Children**
Tax Threshold
National ranking in 2006: * 9th lowest; ** 7th lowest
FPL
The Illinois EITC - history
• 2000 – enacted • 2003 – made permanent, refundable • 2007 – administrative kinks fixed
The Illinois EITC – main messages
• Make work pay – and lift families from poverty • Make taxes fairer • Boost the health of local economies
The Illinois EITC – 2 advocacy tracks To increase the credit’s size, advocates are pursuing: • Standalone legislation • Broader revenue-reform context
The Illinois EITC – big-picture context Voices’ “Fairness for Working Families” plan – different tools for different purposes: • Increase state EITC – targeted help for low-income families • Create a state Child Tax Credit – targeted help for families raising kids • Raise the income tax’s standard exemption – helps all, but especially low-income households
The Illinois EITC –big-picture context One example of how this plan could affect the taxes of a family of four, at different income levels, assuming:
$3,500
$3,000
$2,500
Income tax liability
$2,000
$1,500
• 5 % income tax rate
$1,000
• Doubled EITC
$500
• State child tax credit at 33% of federal CTC
$0
-$500
-$1,000 $20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
Earned income CURRENT tax system
ONE APPROACH to fairness plan
$90,000
$100,000
• Standard exemption at 115% of federal exemption
The Illinois EITC – big-picture context House Bill 174 would: • Increase the personal income tax by 2 percentage points • Triple the EITC • Double the personal exemption • Double the property tax credit
For more information, contact: Sean Noble Director of Government Relations www.voices4kids.org 312-516-5566 [email protected]
