Can cities and counties enact EITCs?

Yes, currently two cities and two counties have developed local EITCs. Montgomery County, Maryland enacted a 15% refundable EITC in 1999. In order to provide the credit, the county initially contracted with the state comptroller’s office. Qualifying families were sent additional checks which were paid from county funds levied from income taxes. The state of Maryland subsequently passed legislation to allow inclusion of any county EITCs on the state’s tax form although no other county has taken advantage of this provision.

In 2003, a coalition of public, private and non-profit groups in San Francisco began working to create a local city/county supplement to the federal EITC. The San Francisco Working Families Tax credit was implemented in 2005 with nearly 10,000 families receiving a refund equal to 10% of the federal EITC. In 2007 the city EITC was converted from a 10% match to a flat $100 refund for qualifying families. The refund was increased to $125 in 2010.

A New York City EITC took effect in August 2004. The 5% refundable credit provided an additional $70 million to approximately 650,000 New York City residents.

Denver, Colorado has also implemented a local EITC, which is funded by the city’s share of the Colorado federal TANF (Temporary Assistance for Needy Families) block grant. Started on January 22, 2002, the Denver EITC is set at 20% of the federal credit. Unfortunately the Denver EITC has been indefinitely supended because of insufficient TANF funds.

For more information about local EITCs, please see “A HAND UP: How State Earned Income Tax Credits Help Working Families Escape Poverty in 2006,” by Ami Nagle and Nicholas Johnson at the Center on Budget and Policy Priorities.