Employment and Barriers to Independence
Poverty and Economic
Well Being
Earned Income Credit
The Maryland Refundable Earned Income Credit
January 28, 2001
Senate Bill 166 and the identical House Bill 222 propose to increase the size of Maryland's refundable earned income credit (EIC). Maryland's refundable EIC builds on the larger EIC available at the federal level, and targets benefits to low-income working families.
Under current Maryland law, the refundable EIC is equal to 15 percent of the federal credit. If a taxpayer has little or no income tax liability, the credit is provided to the taxpayer in the form of a tax refund. SB 166 and HB 222 would increase Maryland's refundable EIC to 20 percent of the federal credit.
This increase would provide the greatest benefit to families with earnings equivalent to full-time, full-year work at the federal minimum wage of $5.15 per hour. The increase in the credit would provide a family with two children and earnings of $10,300 per year an additional $200.
The increase would also provide modest assistance to families with slightly higher incomes. Under the current credit, a single parent with one child and who earns $15,000 per year makes too much money to qualify for a refund. Increasing the credit to 20 percent of the federal EIC would provide slightly more than $100 to this family in tax year 2001.
Further, as the state's income tax cut becomes fully phased-in beginning in tax year 2002, the value of the credit for families with incomes near the poverty level will increase.
The table below shows how much more would be provided to low-income workers in 2001 if Maryland increased its modest credit as proposed in SB 166 and HB 222.
Impact of Refundable EIC Rates
And Fully Phased In Income Tax Changes
on the Tax Liability of Low and Moderate Income Families
(numbers in parentheses indicate the size of a family's refund)
Two Parents, Two Children
| Income | Current Law EIC 15 Pct. TY 2001 |
Proposed Increase to 20 Pct. TY 2001 |
| 10,300 | (601) |
(802) |
| 15,000 | (422) |
(602) |
| 17,050 | (259) |
(418) |
| 20,000 | (24) |
(152) |
| 25,000 | 0 |
0 |
One Parent, Two Children
| 10,300 | (581) |
(782) |
| 14,150 | (389) |
(578) |
| 15,000 | (321) |
(502) |
| 20,000 | 0 |
(51) |
| 25,000 | 0 |
0 |
TWO PARENTS, ONE CHILD
| 10,300 | (344) |
(466) |
| 14,150 | (160) |
(273) |
| 15,000 | (99) |
(205) |
| 20,000 | (0) |
(0 |
ONE PARENT, ONE CHILD
| 10,300 | (269) | (486) |
| 11,250 | (224) | (345) |
| 15,000 | (0) | (104) |
| 20,000 | (0) | (0) |
- For an explanation of how the Earned Income Credit works, see our Primer on Earned Income Credits in Maryland
- Download a .pdf version of the table above.