With poverty on the rise in Louisiana, especially among children, policymakers should expand the state’s version of the Earned Income Tax Credit (EITC)—a tried-and-true tax benefit for families that work, but earn low wages.
Louisiana EITC Program in 2016
Louisiana’s credit is the smallest in the nation, which keeps it from helping as much as it could. The Louisiana Department of Revenue estimates that the state’s EITC program refunded or saved filers over $39 billion dollars from 2006-2010. When passed in 2007, advocate groups estimated that about 29 percent of Louisianans would benefit from the state EITC.
Louisiana EITC versus Federal EITC
In Louisiana, most of the benefits from the federal EITC—over 98 percent of all dollars—go to working families with children, though single workers and people without kids can also claim a small credit.9 Benefits are larger for families with two or three children and for families headed by married couples. The credit phases in as families earn more, until they reach the maximum benefit amount. As income rises, families eventually hit the phase-out range and their credit decreases gradually to zero
What is the Louisiana Earned Income Tax Credit (EITC)?
The Louisiana Earned Income Tax Credit is equal to 3.5 percent of the federal EITC. For the 2011 tax year, the federal EITC is worth a maximum of $5,751, depending on such factors as filing status, income level and number of children claimed as dependents. According to the IRS, the income thresholds for the federal EITC are:
- $13,660 ($18,740 married filing jointly) if you do not have a qualifying child
- $36,052 ($41,132 married filing jointly) if you have one qualifying child
- $40,964 ($46,044 married filing jointly) if you have two qualifying children
- $43,998 ($49,078 married filing jointly) if you have three or more qualifying children
Louisiana EITC and Federal EITC
The maximum amounts of the federal EITC are as follows:
- $5,751 with three or more qualifying children
- $5,112 with two qualifying children
- $3,094 with one qualifying child
- $464 with no qualifying children.
Louisiana Earned Income Tax Credit Income Eligibility
Income eligibility is tiered based on marital filing status and number of children; for example married workers filing jointly and claiming three or more children, the income the State bumped the income threshold to $52,427 in 2014, up from $51,567 in 2013. At 3.5 percent, Louisiana has the lowest percentage federal tax credit return rate of the 25 states and the District of Columbia that offer earned income tax credits (EITCs). By contrast, Maryland offers the highest rate at up to 50 percent of the federal credit.
What is Louisiana Earned Income?
Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self employment. A net loss from self employment reduces earned income. Earned income also includes strike benefits, any disability pay you report as wages, and other taxable compensation. You can elect to include nontaxable combat pay in earned income. Earned income does not include: pensions and annuities, social security payments, workers’ compensation, interest, dividends, or unemployment compensation, scholarship or fellowship grants, nontaxable workfare payment, or any amount received for work while an inmate in a penal institution.