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Washington, DC–Sixteen states taxed working-poor families deeper into poverty last year, according to a new report from the Center on Budget and Policy Priorities. Income tax bills on poor families in those 16 states ranged from a few dollars to several hundred dollars, which is a significant amount for a family struggling to make ends meet, the report said.
“Undermining families’ efforts to work their way out of poverty is never a good idea,” said Phil Oliff, the report’s co-author. “But it’s especially harmful in the current recession, when people are already struggling just to get by.”
The report measures the “tax threshold” in each state–the income level at which families begin owing income taxes. In 16 of the 42 states that levy an income tax, the threshold for two-parent families of four was below $22,017, the 2008 poverty line for such a family. The remaining states as well as the federal government do not tax working poor families.
Two fewer states taxed poor families than in 2007. Michigan adopted an Earned Income Tax Credit (EITC) that pushed its threshold slightly above the poverty line. Oklahoma made changes to its income tax deductions and rates, and expanded a credit for families with children, lifting its threshold above the poverty line for two-parent families of four. Although Hawaii and Louisiana made significant improvements to their tax systems, they remain among the 16 states that tax poor families. A number of other states made significant improvements.
In several states, income-tax treatment of the poor worsened as inflation eroded the value of provisions intended to protect the poor from taxation. This erosion coincided with a rising level of poverty and joblessness resulting from the recession.
Among the report’s findings:
For more information visit www.cbpp.org.