As Rhode Islanders rush to file their taxes this month, many
will use tax breaks provided by our federal and state governments. But not all
benefits are created equal. The reality is that the majority of tax benefits
disproportionately help higher-income taxpayers.
We can reduce this inequality by improving tax credits that
are targeted to low-wage earners, such as the Earned Income Tax Credit (EITC).
The EITC reduces the income tax owed by working families
earning less than $54,000 a year, providing the greatest benefit to low-wage
earners. Rhode Island’s EITC is a refundable tax credit set at 15 percent of
the federal EITC. Twenty-nine states and D.C. use state EITCs to boost the
incomes of working households struggling to make ends meet. In Rhode Island,
over 86,000 filers keep more of their earnings through the EITC.
The EITC rewards work, and improves the outlook for children
in low-income families. Research shows that children raised in families
receiving the EITC do better and go further in school. Rhode Islanders of color
(and their children) will benefit particularly from a higher state EITC, since
they are disproportionately paid wages that fall short of meeting their families’
Connecticut and Massachusetts currently offer refundable
state EITCs at 23 percent of the federal credit—8 points higher than Rhode
Island. Senator Goldin and Representative Slater have introduced legislation
this year to raise the state credit to 20 percent of the federal credit.
Rhode Island policymakers can build an economy that works for
everyone by strengthening Rhode Island's EITC.