Kentucky Earned Income Tax Credit
More Information
A provision establishing a state Earned Income tax Credit is part of the Kentucky Forward Plan that has been introduced by Rep. Jim Wayne and others for the past several legislative sessions.
With the Kentucky Forward Plan in place, Kentuckians who qualify for the federal EITC would get an additional 15% of their federal EITC amount in the Kentucky state tax return.
"It doesn't take a genius to see that now more than ever families and communities need this legislation," said Sam Hall, Perry County KFTC member and father of three.
"Every spring my EITC money helped me afford to go back to school and raise my kids. Sometimes it would pay the rent ... and it would help with school clothes. I used it and it helped me."
"A state EITC would mean a lot to Perry County," Hall added. "People would be paying their bills with this money. They'd spend it right there in the county."
What is an Earned Income Tax Credit (EITC)?
The EITC is a tax credit for low- and moderate-income working families. The federal EITC has been in place since 1975, and 24 other states – including three of Kentucky's neighbors – have adopted a state EITC because of its effectiveness. The Kentucky Forward Plan calls for a Kentucky EITC that is 15% of the federal credit.
Why does Kentucky need an EITC?
Kentuckians deserve the opportunity to lift themselves out of poverty.
The EITC is designed to help people afford to work by offsetting the rising costs of child care, transportation, and utilities that working families need. Families get it by filing their taxes, so it comes when heating costs are the highest and "extra" job – seasonal jobs, outdoor labor, etc. – opportunities are often the lowest. The EITC fills a gap to keep families stable and able to work.
The size of the EITC is based on income and family status. Once a taxpayer’s income reaches a certain amount, the credit reaches its peak, after which it begins to phase out. The credit phases out at $45,060 for families with three or more children.
More than 350,000 Kentucky families would benefit directly from a refundable state EITC, and we'd all benefit from the economic impact of infusing our communities with money that will be spent right at home, fixing cars and buying new school shoes.
Kentucky can do better
Kentucky's poverty and unemployment rates are chronically higher than the national average.
- Kentucky ranked 41st in child well-being, indicating that many children in Kentucky are negatively affected by the consequences of growing up in impoverished families and communities. (Annie E. Casey Foundation, 2011)
- A child born in Kentucky is significantly less likely to succeed than children born in 40 other states because of the effects of poverty. (Education Week, 2007)
- 84,000 children lacked health insurance in Kentucky in 2009. (U.S. Census Bureau)
Kentuckians deserve better, and with proven policies like the EITC, we can help people hold onto their jobs.
What would a 15% state EITC provide to Kentucky’s working poor?
|
Family status |
Income range where EITC is greatest |
Income where the credit phases out |
Maximum amount of federal credit |
Maximum amount of state credit |
|
Single/no children |
$5,100-$6,710 |
$12,080 |
$412 |
$ 61.80 |
|
Joint/no children |
$5,100-$8,710 |
$14,080 |
$412 |
$ 61.80 |
|
Single/1 child |
$7,660-$14,760 |
$31,888 |
$2,747 |
$ 412.05 |
|
Joint/1 child |
$7,660-$16,760 |
$33,888 |
$2,747 |
$ 412.05 |
|
Single, 2+ children |
$10,750-$14,370 |
$36,222 |
$4,536 |
$ 680.40 |
|
Joint/2+ children |
$10,750-$16,760 |
$38,222 |
$4,536 |
$ 680.40 |
Sources: Marguerite Casey Foundation, Earned Income Tax Credit: Analysis and Proposals for
Reform, 2005; State EITC Online Resource Center; Kentucky Youth Advocates; Education Week 2007