More About Erica Williams

Erica Williams

Erica Williams joined the Center in August 2009 as a Policy Analyst with the State Fiscal Project

Full bio and recent public appearances | Research archive at CBPP.org


States Looking to Strengthen Earned Income Tax Credits

March 30, 2015 at 10:56 am

As states continue to turn the corner on the Great Recession, policymakers in a number of states are looking to help low-paid working families by creating or expanding refundable state earned income tax credits (EITCs). These credits build on the federal EITC, which promotes work, helps families make ends meet, lifts them out of poverty, and yields lasting benefits for kids, studies show.

States considering EITC expansions include:

  • Illinois, where lawmakers have proposed doubling the size of the EITC to 20 percent of the federal credit, helping around 1 million working households.
  • Massachusetts, where Governor Charlie Baker has proposed doubling the EITC to 30 percent of the federal credit, helping more than 400,000 working households. Meanwhile, bills proposed in both houses of the state legislature would boost the EITC to 50 percent of the federal credit.
  • Minnesota, where Governor Mark Dayton has proposed a new EITC expansion — on top of the large increase enacted last year — that would make another 30,000 working Minnesotans eligible and boost the credit for more than four in five current recipients.
  • Rhode Island, where Governor Gina Raimondo has proposed building off of last year’s EITC changes (which cut the credit to 10 percent of the federal EITC but made it fully refundable, producing a net gain for most recipients) by increasing the credit to 15 percent of the federal EITC.
  • Washington State, where Governor Jay Inslee has proposed funding the EITC, which the state enacted in 2008 but has never funded due to the recession, helping over 400,000 working households.

States considering new EITCs include:

  • California, which has the nation’s highest poverty rate under a poverty measure that accounts for taxes and non-cash benefits as well as cash income; a recent proposal to create an EITC would benefit around 3 million working households.
  • Montana, where families with poverty-level wages pay some of the nation’s highest state income taxes; a proposed EITC would benefit 80,000 working families.

A number of states improved their credits in 2014, as our updated paper explains.  Most notably, the District of Columbia expanded the EITC for workers without dependent children in the home, an idea with bipartisan support at the federal level.  Twenty-five states plus the District of Columbia have EITCs (see map).

States are smart to use one of our most effective tools to ensure working families recover along with the economy.  State EITCs allow state lawmakers to leverage the power of the federal credit at a relatively low cost.

Kansas Isn’t the Only Tax-Cutting State With Budget Woes

January 16, 2015 at 3:08 pm

As we noted this morning, Kansas is the poster child for the harmful consequences of large state tax cuts, which can open up huge budget holes and undermine the foundations of a strong state economy, like a high-quality education system. But Kansas isn’t the only state experiencing pain of its own making.  Big tax cuts are playing a major role in several other states’ budget woes.  For example:

  • North Carolina followed Kansas’ lead and enacted large cuts to personal and corporate income taxes in 2013.  The cuts, which started taking effect last January, are already contributing to budget shortfalls; North Carolina faces a $200 million shortfall so far in the current budget year.   Some estimates put the 2016 cost of the tax cuts at $1.2 billion (about 8 percent of the budget).
  • Pennsylvania is $2 billion (nearly 7 percent) short of the revenue it needs this year to maintain services at current levels. This is an ongoing problem — revenues haven’t kept pace with needs in recent years — and tax cuts are a major reason. For example, the state has repeatedly cut a corporate tax called the capital stock and franchise tax. This tax, which raised more than $1 billion a year before the recession, will bring in an estimated $118 million in 2016 before disappearing altogether.
  • Wisconsin projects that revenues over the coming biennium will fall $2.2 billion (6.5 percent) short of agencies’ budget requests. This comes on the heels of several sets of tax cuts over the past four years that will cost over $1 billion this fiscal year, the state’s Legislative Fiscal Bureau estimates, and likely more than $2 billion in the next biennium.

Despite the steady improvement of the national economy, these states are trying to figure out how to plug budget holes.  Other states shouldn’t follow their example.

Child Poverty Remains High, But States Can Make a Difference

September 19, 2014 at 12:55 pm

Update, September 22:  We’ve corrected the map in this post. 

More than half of the states plus the District of Columbia had child poverty rates of 20 percent or higher last year (see map), new data from the Census Bureau’s American Community Survey show, and in some states — like New Mexico and Mississippi — poverty affected as many as one in three kids.  Such extensive child poverty unnecessarily damages the prospects of millions of children.

Relative to their better-off peers, poor children have poorer health, do less well in school, and complete fewer years of education.  Over the long term, they are more likely to have chronic bad health and to work fewer hours and earn less as adults, which can contribute to a vicious cycle of poverty.

In addition, the stress of hunger, unsafe neighborhoods, and unstable housing, among other hardships that many poor families face, can have harmful physiological effects on children’s still-developing brains.  This “toxic stress” can impede their social and emotional development and ability to learn.

States have a range of effective tools to reduce child poverty and the associated hardships. They can, for instance:

  • Raise the state minimum wage in conjunction with creating or improving the state’s earned income tax credit.
  • Provide quality early childhood education to help boost the future prospects of children in poor families while allowing their parents to work and build a better future for them.
  • Connect more poor children to a full range of federal supports, including nutrition, housing, and health care.

Poverty Above Pre-Recession Levels in 47 States, New Census Data Show

September 18, 2014 at 4:46 pm

Poverty remained above pre-recession levels last year in 47 states plus the District of Columbia, our analysis of Census data issued this morning shows (see chart).  In some states, the increase was substantial — in Arizona, California, Florida, Georgia, and Nevada, poverty rates were four to five percentage points higher in 2013 than in 2007.  The stubbornness of high poverty rates in the wake of the Great Recession underscores the need for states to do more to help working families make ends meet.

Poverty rates in the states not still above pre-recession levels, Alaska and the Dakotas, weren’t statistically different from 2007.

Unequal wage growth and rising income inequality have played key roles in preventing more substantial improvements in poverty.  For workers earning low pay, wages are right where they were 40 years ago after adjusting for inflation, according to the Economic Policy Institute.  And since the recession’s official end in 2009, most workers’ wages have fallen, while workers at the top have seen some growth.

States have tools to help to address low wages and rising income inequality.  They can create or improve state earned income tax credits (EITCs), which promote work and reduce poverty and can improve low-income children’s chances of success both in school and, later, in the workforce.  States can also raise their minimum wage — the federal minimum wage is 22 percent below its peak value in 1968, after adjusting for inflation — and index it to inflation.  Improvements in these two areas are complementary for reasons we explain here, reaching a broader population than the EITC or minimum wage alone and keeping many more families out of poverty.

Two Policy Tools States Can Use to Build a Broader Recovery

September 3, 2014 at 3:35 pm

Low-wage workers need a boost.  In the last few years, their wages have fallen sharply and now are no different than they were 40 years ago, adjusted for inflation (see chart), leaving millions struggling to afford basics like decent housing in safe neighborhoods, nutritious food, reliable transportation, and quality child care.  As we detail in a new paper, states can use two effective policy tools to help working families and individuals meet their basic needs and pursue a path to financial stability:  state earned income tax credits (EITCs) and minimum wages.  The two work best when states strengthen them at the same time.

State EITCs and minimum wages help make work pay for families who earn low wages.  They increase income, widen the path out of poverty, and reduce income inequality.  They also help to build a stronger future economy because lifting family income for young, low-income children can result in improved learning and educational attainment and higher future earnings in adulthood.

While each policy is effective in its own right, state EITCs and minimum wages build upon each other’s effectiveness in boosting the prospects of low-wage working families.  State policymakers should improve them in tandem.  Here’s why:

  • State minimum wages and EITCs reach overlapping but different populations.  State EITCs primarily target low-income families with children and are available to working families earning more than three times a full-time minimum wage worker’s annual salary of $14,500.  The minimum wage goes to the very lowest-wage workers, regardless of factors like family income, family status, or age.
  • Increasing both at the same time provides added support to the working families who need it most.  Together, a minimum wage boost and a robust state EITC can move families beyond poverty and further down the road to economic security.  Also, a minimum wage increase provides the added benefit of increasing the EITC for some families.
  • The benefits of the two policies are timed differently.  An expanded minimum wage increases every paycheck, which helps with routine expenses, like food, monthly bills, and rent.  State EITCs are paid at tax time and can be used for larger, one-time expenses, like car repairs or a security deposit.
  • Improving both together allows the public and private sectors to share the cost of boosting incomes for those who work.  The EITC is a cost largely borne by state government, and by extension state taxpayers.  The state minimum wage is borne principally by the private sector, especially employers and consumers.  Improving both policies spreads the cost of making work pay more broadly than does either policy alone.

Many states have increased their minimum wage and a few states have enacted EITC improvements in 2014.  Three states — Maryland, Minnesota, and Rhode Island — and the District of Columbia have done both.  Other states also should look to advance the two policies at the same time to make the biggest impact for families most in need.

Click here to read the full paper.