State Low-Income Tax Relief: Recent Trends

Although efforts to relieve state tax burdens on poor families are not new, the nature of such tax relief changed in the 1990s. Previous decades, tax relief focused on sales or property taxes. More recently, states have enacted refundable income tax credits, particularly work-related provisions such as Earned Income Tax Credits and child care credits. Such credits reduce poor families' overall tax burdens, lift incomes above the poverty line, and create positive work incentives that complement states' welfare reform efforts. New federal rules allowing such credits to be partially funded with federal dollars are likely to extend these trends.