United Way Calls for a Refundable Earned Income Tax Credit in PA

Lemoyne, PA – United Way of Pennsylvania is calling for state legislators to join 28 other states that currently offer individual working taxpayers some tax relief in the form of an Earned Income Tax Credit. A new economic impact study commissioned by United Way of Pennsylvania and released today shows that for every $1 in cost to the state budget, a refundable EITC will generate a return of $7 from additional state and local tax income, business revenue and reduced spending on public assistance.

“A refundable state Earned Income Tax Credit (ETIC) is exactly what the Commonwealth of Pennsylvania needs in 2022. Putting taxpayer earnings back into the pockets of working households will help citizens, businesses, and government move forward from the pandemic while creating more thriving and equitable communities,” said Kristen Rotz, President of United Way of Pennsylvania.

United Way of Pennsylvania commissioned Pennsylvania State EITC: A Benefit-Cost Analysis from the University of Texas at Austin Child & Family Research Center which shows:

  • A 10% EITC will generate annual benefits of at least $562 million to Pennsylvania’s economy after taking into account $80.5 million in direct and administrative costs to the state for implementing the refundable EITC. At a 25% credit, the expected costs are $366 million and likely benefits total at least $1.2 billion.
  • A 10% EITC will generate $176 million in human services cost avoidance. At 25%, the human services cost avoidance is $213 million.
  • Enacting a state-level, refundable EITC equal to 10% of the federal benefit will benefit about 10% of the state’s population, or nearly 716,000 households, with an average benefit of $197 per claim.
  • A refundable state EITC equal to 25% of the federal credit will benefit 12% of Pennsylvanians (approximately 874,000 households) who will receive an average benefit of $594.
  • Black and Hispanic families will receive a greater benefit than the state average, which will incrementally help address the income inequality that contributes to higher poverty rates and income instability in Black and Hispanic households across Pennsylvania.
  • A state EITC is projected to increase workforce participation and work hours, reduce child poverty, reduce the number of low birthweight births, reduce child maltreatment and foster care entry, boost educational attainment, increase access to health insurance coverage among children, reduce violent crime and help prevent adult suicides.
  • When a state EITC is combined with the current Pennsylvania tax forgiveness program, 1 in 4 Pennsylvanians would be receiving some form of state income tax relief.

“A refundable state-level Earned Income Tax Credit would be a resounding win for working Pennsylvanians, our state’s businesses of all sizes, and state and local governments. When qualifying households receive some of their earnings back, the majority will re-invest it in the economy to help meet household needs. That’s why several states across the country have increased their EITC as part of a strategy to help rebound from the pandemic. 2022 is the year for Pennsylvania to step into the ranks of a majority of states who have a state earned income tax credit,” Rotz said.

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