“The Impact of State Income Taxes on Low-Income Families in 2008”

While some working-poor families get help lifting themselves out of poverty through exemptions from state income taxes, in many states they continue to face substantial state income tax liability. This analysis of state income tax systems for the 2008 tax year finds that 16 states taxed working-poor families deeper into poverty last year, with bills ranging from a few dollars to several hundred dollars. In addition, 26 states collect taxes from families of four with incomes just above the poverty line.

The report, produced by the Center on Budget and Policy Priorities, analyzes the income-tax treatment of the poor in relation to the rising level of poverty and joblessness of the recession. It suggests policies to reduce or eliminate income taxes on low-income families. It argues that even in a time of widespread state budget shortfalls, there are a number of relatively inexpensive, effective solutions for state policymakers to consider, including state Earned Income Tax Credits (EITCs) and other low-income tax credits.
 

Read the report.