A Kentucky nonprofit says a state earned income tax credit would help working families—and it would help pay for itself.
Kentucky Youth Advocates released an issue brief Tuesday that says one in four Kentucky taxpayers could benefit from a new state earned income credit, which would piggyback onto the existing federal earned income credit.
KYA Executive Director Terry Brooks added that the proposal, which could cost up to $134 million per year in the form of tax rebates, would also put money back into local economies.
“We know that families who get earned income credits are not going to take that refund and put it in their off-shore account,” Brooks said. “Instead, they’re going to be spending money at the local hardware store, at the local car repair shop, at the appliance store. They’re going to be taking their kids to the department store to buy them clothes for school.”
With the prospect of comprehensive tax reform looking like more of a long shot as the 2014 budgetary session of the General Assembly draws closer, Brooks says that the bipartisan pedigree of the earned income tax credit could help usher its inclusion into the state’s tax code.
“You’ve got a tax idea that was invented by Richard Nixon, championed by Ronald Reagan, and most recently President Obama,” Brooks said. “That says to state legislators this doesn’t have anything to do with ideologies, it doesn’t have anything to do with politics, it has to do with results.”
In 2012, more than 400,000 Kentucky taxpayers claimed $912 million from the federal earned income tax credit. If enacted, a state income credit could generate an estimated $134 million more for low and middle income families, the report says.
The report can be found here.
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