Earned Income Credit

Maryland Treats Poor Families Under Its Personal Income Tax Better Than Many Other States,

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March 15, 2000

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March 15 -- Maryland's personal income tax system is more favorable for low-income taxpayers than those in most other states, according to a new national report.

The report issued by the Washington, D.C.-based Center on Budget and Policy Priorities shows that a Maryland single-parent family of three does not owe income tax if its tax year 1999 earnings are below $24,200. Only two states, California and Minnesota, have higher income tax thresholds, the report said.

By contrast, most of Maryland's nearby states, including Virginia, West Virginia, Delaware, New Jersey, and North Carolina, levy income tax on families with incomes below the poverty line of $17,028. The threshold in Virginia is as low as $5,400. The District of Columbia exempts poor families but levies a high tax on the near-poor, those with incomes 25 percent above the poverty line, the report said.

Maryland's income tax includes another provision that benefits low-income working families. It provides a refund to families with incomes at or below the poverty line through its Refundable Earned Income Credit. For instance, a single parent with two children with full-time minimum wage earnings in 1999 qualifies for a $325 refund, the report said. Only eight other states provide such a refund.

Maryland's refund is somewhat smaller than the refunds in other states, but legislation before the General Assembly would expand the Maryland refund.

"The Earned Income Credit partially offsets the burdens of other taxes and helps families meet costs associated with employment such as transportation and child care," said Steve Bartolomei-Hill, director of the Maryland Budget & Tax Policy Institute. "Maryland still taxes the poor more heavily than the rich overall, but the EIC is a success story worth building on."

"The report shows that the Maryland income tax, and in particular the Maryland Earned Income Credit, is an important tool for achieving tax fairness," said Nick Johnson, a co-author of the report who is also an analyst at the Maryland Budget & Tax Policy Institute. "In this respect, Maryland is something of a model for the region."

Related Reports

• Maryland fact sheet (available after 3/15/00)