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Research report

The New Federalism and State Tax Policies Toward the Working Poor

Elaine Maag, Diane Lim Rogers
September 1, 2000
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Abstract

This paper discusses how state income taxes and sales taxes affect the working poor. While some states impose substantial burdens through income taxes with low thresholds and/or sales taxes that do not exempt necessities, others provide generous subsidies through refundable earned income tax credits similar to the federal earned income tax credit. A few states go beyond the federal model and also provide refundable child care credits. In evaluating the role of tax policy to assist low-income people, policymakers need to study the incentives and disincentives associated with various features of the tax system.

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Federal Budget and Economy State and Local Issues Individual Taxes
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Meet the Experts

  • Elaine Maag
    Senior Fellow, Research
  • Diane Lim Rogers
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