How Increasing the Federal EITC and CTC Could Affect State Taxes

Brief

How Increasing the Federal EITC and CTC Could Affect State Taxes

April 22, 2021

Abstract

The American Rescue Plan (ARP) Act of 2021 increased the federal earned income tax credit (EITC) and child tax credit (CTC). In turn, 28 states and the District of Columbia will see increases in their state EITCs because of existing linkages between federal and state tax codes. We estimate that 4.6 million households will see an average state EITC increase of $153. One state, Oklahoma, will have an automatic increase in their state CTC of about $100 for about 300,0000 households. In about 1 million households, state taxes will increase by an average of $153, much smaller than the average federal tax cut for these households ($2,700).

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