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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