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Opinion: Means tested tax credits punish the poor for working. Maryland makes it worse

August 24, 2022

Federal income tax rates range from 10 percent in the lowest income bracket to 37 percent at the highest bracket. At the state level, Maryland levies progressive rates ranging from 2 percent to 5.75 percent. This might suggest that the rich face substantially higher tax rates than the poor. Yet, a holistic examination of the income tax code reveals the opposite: Low-income households face the steepest tax rates, and Maryland makes it worse. What explains this counterintuitive trend? Means testing: a determination of whether a household is eligible for the full amount, partial amount, or none of a government benefit based on their income. For example, the Earned Income Tax Credit withdraws $21 for each $100 of earnings above $19,520, for parents with two children. This is equivalent to taxing that parent at a 21 percent rate. Either way, the

Article Source: Maryland Matters

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