Yesterday, Governor Quinn signed into law a bill that will doubles the state’s Earned Income Tax Credit (EITC) over a two year period and boosts the personal exemption by $50 to $2,050. The bill also ties the credit to the inflation rate. Currently, the Illinois EITC is at 5% of the federal EITC. This new legislation will increase the credit to 7.5% next year and 10% the year after.
This increase means that a single parents working a minimum wage job earning about $12,800 annually will save $150 on their taxes next year. A married couple with three children earning $30,000 a year will save about $200 on their taxes. It is estimated that more than 1 million Illinoisans will be directly impacted by this increase.
As part of the Make Work Pay Coalition, IABG has been advocating for an increase in the state EITC for years. This increase in the credit will:
- Further incentivize work: For those with very low earnings, additional hours of work yield both more wages and a larger EITC.
- Lift Illinoisans out of poverty: The EITC is one of the most cost-effective, most targeted approaches to reducing poverty among children and families.
- Offset the disproportionate share of state and local taxes that our lowest-income workers pay: Low-income families were disproportionately affected by the increase in the state’s income tax rate. While the increase was an essential step towards resolving the state’s prolonged fiscal crisis, the revenue legislation included no provisions to improve tax fairness.
The tax credit was the counterpart to a bill Quinn signed in December giving corporate tax breaks to Sears Corp. and CME Group.