The Earned Income Tax Credit (EITC) is a tax credit that subsidizes work for low-income families. The EITC is the nation’s largest cash or near cash assistance program after the Supplemental Nutritional Assistance Program (SNAP). Together with the Child Tax Credit, the EITC lifted about 7.5 million people out of poverty in 2019, including about 4 million children, according to the US Census Bureau.
The amount of EITC depends on a family’s earnings and number of children; the maximum credit in 2022 was $6,164 for a family with two children. The federal EITC is refundable, which means the full amount can be claimed even if it exceeds a taxpayer’s tax liability. Refundability is critical to the success of the EITC because it allows the credit to still reward work and support families even if workers pay little income tax.
Oklahoma is one of 30 states (including DC) with a state EITC, set at 5 percent of the federal credit. In 2016, the Oklahoma Legislature made the credit non-refundable in response to a budget shortfall. In 2021, the Legislature reversed this decision and restored refundability of the credit; however, the state credit was pegged permanently to 5 percent of the federal credit as of 2020. The non-refundable state EITC was claimed on 312,301 returns for $13.2 million in 2020, according to Oklahoma Tax Commission records.