A new tax credit designed to alleviate financial burdens for low- to moderate-income workers has officially become law in Pennsylvania. Governor Josh Shapiro signed the 2025–26 state budget and accompanying code bills, which introduce the Working Pennsylvanians Tax Credit. This initiative, proposed by state Representative Christina Sappey, aims to support nearly 1 million working households across the state.
The tax credit is closely linked to the federal Earned Income Tax Credit (EITC), providing a state-level benefit that equals 10% of the federal amount. Households qualifying for the federal program will automatically qualify for the state credit, potentially receiving returns between $400 and over $1,000 on their state personal income taxes, depending on income and family size.
Supporting Working Families Amid Rising Costs
Representative Sappey emphasized the importance of this initiative in addressing the financial struggles faced by families earning modest wages. “Many are dual-income households juggling rent or mortgage payments, child care, health care, and everyday essentials,” she stated. “When those basic costs outpace paychecks, families struggle — and our entire economy feels the impact.”
The tax credit aims to assist working families without the need for them to qualify for other public assistance programs. Citing successful implementations in other states, Sappey noted that similar credits have been effective in stimulating local economies and reducing the 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 added.
Building on a Proven Federal Program
The federal EITC is recognized as one of the most effective anti-poverty tools in the United States. In the 2023 tax year, approximately 802,000 households in Pennsylvania benefited from the federal program, receiving over $2 billion in total, with an average benefit of $2,600 per household.
With the enactment of the Working Pennsylvanians Tax Credit through the Fiscal Code (Act 45 of 2025), Pennsylvania joins 31 other states that have established a state-level complement to the federal EITC. Lawmakers assert that this new program is crucial for stabilizing the workforce, enhancing consumer spending, and reinforcing the state’s middle class during a period marked by rising household expenses and uneven wage growth.
As Pennsylvania moves forward with this initiative, the impact on working families and the broader economy remains to be seen, but the intent is clear: to provide much-needed financial relief and support to those who contribute to the state’s economic vitality.
