Large numbers of working poor New Yorkers are burdened by city personal income tax liability, even though their incomes are low enough to escape state and federal income taxes. Taxing the income of households struggling to escape poverty strikes many observers as unfair. Moreover, these taxes are likely to be counterproductive, decreasing incentives for labor force participation and making it more difficult to move welfare recipients into the paid workforce.

In response to this problem, both the Administration and the City Council have recently proposed creating a refundable earned income tax credit (EITC) for low-income city residents. On Monday, 24 May IBO will release its latest fiscal brief, Tax Relief for the Working Poor: Proposals for an Earned Income Tax Credit, analyzes the costs and benefits of the two proposals.

The fiscal brief provides a discussion of federal and state earned income tax credits and examines the extent to which New York City taxes the working poor. It also examines the alternative proposals for a city EITC, including the costs and benefits of each proposal. The final section of the report looks at the possible use of New York State's TANF surplus to fund a portion of a city earned income tax credit.