The Center on Budget and Policy Priorities explains the federal Earned Income Tax Credit: "The federal Earned Income Tax Credit, which began in 1975 and has been expanded several times since then, is often heralded as the most effective anti-poverty program in the United States, particularly for children in working families. In 2009 alone, it lifted 6.5 million working families, including 3.3 million children, out of poverty.
"The credit effectively boosts the income of working families earning low wages by offsetting their income and payroll taxes and increasing their workforce participation. In other words, it makes work pay by allowing low- and moderate-income families to keep more of what they earn."
In Alaska in 2008 the EITC was claimed by 38,488 taxpayers. Using IRS data, 10.7% of all federal tax returns filed in Alaska in 2008 claimed the EITC, versus an average of 17.3% nationally. That makes Alaska's EITC claims rate the second lowest in the nation after New Hampshire (10.6%). The highest rate is Mississippi at 31.8%. The top six states are in the South.
The CBPP goes on to recommend that states implement an EITC, and estimates the cost in Alaska at $3, $6, or $12 million annually depending on whether the rate is set at 5, 10 or 20 percent of the federal credit.
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