A critical part of the response to the economic downturn that hurt many families across the country from the onset of the COVID-19 pandemic, the federal and state governments passed legislation in 2021 that improved working family tax credits such as the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). These have proven to be powerful tools that help mitigate economic hardship for children and their families by supporting low-income households in securing basic needs and cover expenses, especially during unforeseen circumstances. The temporary federal expansion of the Child Tax Credit, along with other income supports, led to historic reductions in child poverty nationwide.
The Maryland General Assembly temporarily expanded the state EITC to include thousands of low-income workers who were previously ineligible for the credit—including many individuals without qualifying children, and immigrant Marylanders who file taxes using an individual taxpayer identification number (ITIN)—while increasing the monetary value for all recipients. Such expansions in 2021 made significant changes:
- On average, the state refundable credit for the tax year 2020 increased to more than $850, allowing over 400,000 Marylanders to benefit
- More than 90,000 workers not claiming dependents can receive a credit up to $530, many times greater than the credit they were previously eligible for, and
- Over 100,000 immigrant taxpayers became newly eligible for the credit
In addition to expansions made to the state EITC, Maryland’s creation of the state CTC in 2021 further expanded economic security.
Maryland’s CTC included the following:
- Children under 17 who have a disability are eligible for the credit up to $500 if their family income is less than $6,000
- The credit is valid for tax years 2020-2022 so families filing taxes in 2021 and 2023 can claim the credit
- The state CTC is reduced by the amount a family receives from the federal CTC
Maryland children and families need the legislature to act quickly
Despite evidence suggesting the need for continued financial support for Maryland families who are still struggling to get by, the General Assembly took no action in 2022 that could have expanded and extended the CTC past its sunset. Proposed legislation in 2022 to strengthen the state CTC would have:
- Increased the family income requirement to $15,000, allowing more families to benefit
- Included all children under 6 years, while maintaining the credit for children with disabilities under 17
- Eliminated the monetary reduction from families that received the federal CTC, allowing a flat credit of $500 per child
- Secured the credit through the tax year 2026 (returns filed through 2027)
The legislature also did not act in 2022 make the temporary state EITC expansions permanent. As Maryland families continue to face economic challenges, including higher costs for essentials like food, rent, and gas, it is critical that the Maryland does not follow the path of Congress and allow this vital economic lifeline to expires. The current provisions will expire if policymakers do not take action in the upcoming 2023 legislative session.