Historic State Tax Credits Wins Built on Long-term Investments

Historic State Tax Credits Wins Accomplished Built on Long-term Investments

The past few years have been exciting times for the expansion and modernization of state tax credits, helping low-income families work toward financial security. As of the fall of 2023, there are now 31 states, the District of Columbia, Guam, and Puerto Rico with a state Earned Income Tax Credit (EITC) and 14 states with a state Child Tax Credit (CTC) – up dramatically from 2020.

Notably, in 2023 alone, Colorado, Connecticut, Hawaii, Maryland, Michigan, Minnesota, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington state all expanded or modernized their state EITC or CTC. Thanks to these efforts, hundreds of thousands of low-income families will get more money back at tax time to help purchase food and school supplies, pay for rent, child care, and health care, enroll in school, and afford other essentials.

While these one-year gains are amazing, it is critical to remember that these hard-fought improvements for low-income families were years in the making and were built on the previous decade or more of investment in policy analysis, communications, partner engagement, public will building, and refinement in strategy. Policy advancements at this scale do not happen overnight. They are the result of a robust ecosystem of organizations in states that have the capacity to advance sophisticated policy proposals and engage the public, to increase awareness of the great need of struggling families, and to harness the opportunity presented by additional revenues available in states.

Launched in 2012, the EITC Pooled Fund — a project of Economic Opportunity Funders and Tax Equity Funders Network — has invested more than $8.5 million in the past decade to create, expand, modernize, and defend state tax credits. Nearly all of the states that have made significant expansions in the last year have been previous, and often multi-year, EITC Pooled Fund awardees. Without the long-term investment from the EITC Pooled Fund and other philanthropic supporters, the dedication to creating the capacity to build the public will for expansion and modernization of tax credits, and the attention to supporting both policy advocacy and grassroots engagement, these most recent tax credit wins would likely not have been as robust.

Hover over each state to view data EITC Pooled Fund award year, amount, and type.

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Long-term investments take many forms and have various outcomes. Two examples of long-term investment include:

Michigan

The EITC Pooled Fund started its support of policy analysis and advocacy related to Michigan’s state EITC in 2012 with initial support of efforts to defend the state EITC against efforts to eliminate it. The Pooled Fund supported policy and advocacy efforts in Michigan in six of the last 11 years working to defend the state EITC, and to rebuild community and opinion leader support, which led to a successful effort in 2022 to increase the state EITC from 6% to 30% of the federal credit.

New Mexico

Starting in 2014 the EITC Pooled Fund provided support to New Mexico policy and community engagement organizations to build interest in expanding the state’s EITC. In 2021, efforts to grow a broad range of supporters, including immigrant advocates, led to the successful expansion of the state EITC and modernized the state EITC to include immigrant workers. This work laid the foundation for New Mexico policy and engagment groups to work collaboratively to help pass a new state Child Tax Credit in 2022.

Long-term support also takes the form of continuing funding after policy change has been achieved. The EITC Pooled Fund has understood that the success of any policy change does not end with the passage of a bill. Important work on implementing tax credits measures–which often happens in the years after a bill passess–can be just as critical as the work to expand or defend the tax credits. An exciting example of this is in Washington state.

Washington

The EITC Pooled Fund began its funding in 2012 to support the development of an idea to create a new state tax credit. As Washington state does not have an income tax, the policy and community engagment groups’ approach had to be creative and took years to build momentum. After the new state tax credit finally passed in 2021, the Pooled Fund continued to support groups on the ground in Washington to ensure that the administrative processes were developed to ensure that low income families could access the new credit.

The state tax credits gains of the past year are indeed gratifying. But, philanthropy’s work to ensure low-income families achieve economic security is not done.

If you are interested to learn more about and join the EITC Pooled Fund please contact Ami Nagle, [email protected].