Increases the state earned-income credit as of January 1, 2025 to seventeen percent (17%) of the federal earned-income credit, not to exceed the amount of state income tax.
The proposed increase in the earned-income credit is expected to significantly support low-income earners by allowing them to retain a larger portion of their earnings, effectively improving their net income. By adjusting the earned-income credit upwards, the legislation is presented as a way to combat poverty and provide additional financial support to working-class families in Rhode Island. The changes will necessitate administrative updates within the tax system to accommodate these adjustments and will place fiscal implications on the state treasury depending on the number of eligible claimants.
Bill S2054 seeks to increase the Rhode Island earned-income credit from 15% to 17% of the federal earned-income credit as of January 1, 2025, and further raise it to 18% starting January 1, 2026. This bill is targeted towards low-income working individuals and families, aiming to provide them with greater financial relief through tax credits that would reduce their overall tax liability.
Some arguments against the bill center on concerns about the ongoing financial burden it may place on the state's budget. Opponents may claim that increasing the earned-income credit could lead to a decrease in state funds available for other essential services. There is also a possibility of debates regarding the long-term sustainability of tax credits like these, especially in the context of an aging population and potential changes to federal tax policies that could affect state income levels.