Independent Analysis and Information on Iowa Tax and Budget Issues

Another myth destroyed: No growth boost in states without income taxes.

See Bloomberg News report.

IFP Statement

EITC Veto Harms Families and Iowa's Economic Recovery

Governor Vetoes Modest Boost in Credit for Low-, Moderate-Income Working Families
July 28, 2011


The Iowa Fiscal Partnership today released the following public statement regarding the Governor's veto Wednesday of an improvement in the Earned Income Tax Credit:

Governor Branstad’s veto of the modest increase in the state Earned Income Tax Credit (EITC) hurts working people and the economy. The legislation would have increased Iowa’s credit from 7 percent to 10 percent of the federal credit.

The state EITC affects over 225,000 Iowa households, all of whom are working. Ninety-five percent of the benefits go to working families with children, all of whom have income of less than $48,000.

The EITC improves tax fairness, boosts income available to families raising children and reduces poverty. Research has shown it helps the economy, especially in difficult times.

Because of the federal EITC, most families with children do not owe federal taxes until their income is above $42,000, but Iowa’s income tax begins taxing families when their income is above $22,000. A family of four making $30,000 in Iowa would have received a state income tax reduction of about $97 through enactment of the EITC increase, if Governor Branstad had not vetoed the measure.

While this is not a lot to some families, it makes a difference for families who are working and trying to raise their children on what is only a little above the poverty level.

Stagnating incomes in Iowa have coupled with growing costs of basic household necessities to force tough choices on moderate-income working families trying to make ends meet. Money earned due to the EITC is spent on those necessities. It is one of several policy options that offer a way to both help the economy, and fill gaps between low-wage work and the cost of living.

The Iowa Fiscal Partnership is a joint budget and tax policy initiative of two nonpartisan, Iowa-based organizations, the Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines.

A joint effort of the Iowa Policy Project and the Child & Family Policy Center (logos).