A new tax credit in Pennsylvania aims to alleviate financial stress for low- to moderate-income workers. The Working Pennsylvanians Tax Credit was established after the governor signed the 2025–26 state budget and accompanying legislation. This initiative, championed by state Representative Christina Sappey, is designed to benefit nearly 1 million working households across the state.
The tax credit directly correlates with the federal Earned Income Tax Credit (EITC). Any household qualifying for the federal program will automatically qualify for the state version, which offers a benefit equal to 10% of the federal credit amount. Depending on their income and family size, eligible Pennsylvania residents could receive refunds ranging from $400 to over $1,000 on their state personal income taxes.
Supporting Working Families Amid Rising Costs
Sappey emphasized the importance of the initiative for families earning modest wages who are struggling with increasing living expenses. “Many are dual-income households juggling rent or mortgage payments, child care, health care, and everyday essentials,” she stated. She pointed out that when basic costs outpace income, families face significant challenges, which in turn affects the overall economy.
The aim of the tax credit is to support working families without requiring them to rely on other public assistance programs. Sappey referenced data from states with similar tax credits, asserting that such measures not only stimulate local economies but also reduce pressure on social safety nets. “For every dollar returned to families through this state tax credit, Pennsylvania will receive $4 back in economic growth and save $3 on social spending,” she noted.
Economic Impact and Broader Context
The federal EITC is recognized as one of the most effective anti-poverty programs in the United States. For the 2023 tax year, approximately 802,000 Pennsylvania households received over $2 billion through the federal EITC, with an average benefit of $2,600. With the introduction of the Working Pennsylvanians Tax Credit, Pennsylvania becomes the 32nd state to implement a state-level complement to the federal program.
Lawmakers believe the new tax credit will help stabilize the workforce, enhance consumer spending, and strengthen the state’s middle class amid rising household expenses and uneven wage growth. The initiative was enacted through the Fiscal Code (Act 45 of 2025), which was signed on Wednesday alongside the budget and related legislation.
As Pennsylvania embarks on this new chapter in tax policy, the hope is that the Working Pennsylvanians Tax Credit will provide much-needed relief to families, bolstering their financial security and contributing to the state’s economic health.
