16 States Tell Poor, 'Show Us the Money'

A national analysis by the nonpartisan Center on Budget and Policy Priorities has found that 16 states -- including many identified by Marguerite Casey Foundation as having some of the neediest residents in the country -- tax the working poor even deeper into poverty.

In the south last year, Alabama collected almost $500 from two-parent families raising children on less than $22,000.

In Georgia, extremely poor families, meaning those couples raising children on less than $16,513, were taxed. Other states following similar policy are Hawaii, Michigan, West Virgina, Illinois, Indiana, Montana and Ohio.

The outlook was even worse for single parents. In three states -- Alabama, Georgia and Montana -- mothers or fathers raising children on earnings of less than $12,874 were required to pay.

“Undermining families’ efforts to work their way out of poverty is never a good idea,” says Phil Oliff, co-author of the study. “But it’s especially harmful in the current recession, when people are already struggling just to get by.”

Twenty-six states, he notes, collect taxes from families with household incomes hovering just above the poverty line.

Over the past two decades, policymakers increasingly have viewed tax exemption for poor families as a straightforward way to reduce poverty and support work. Between 1991 and 2008, the number of states levying income taxes on such families decreased from 24 to 16, and the federal government has exempted poor families since the mid-1980s.

Taxing people deeper into poverty runs counter to the goal of helping families achieve self-sufficiency,” Oliff says.