LDI Research Helped Shape Pennsylvania’s New Working Pennsylvanians Tax Credit

Pa.’s New Bipartisan Tax Credit is Designed to be Simple and Refundable – Reflecting Core Points From Penn LDI Researchers Who Briefed State Leaders

January 8, 2026

By:

Joanna Kim, MPH

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On Nov. 12th, Gov. Josh Shapiro signed the Working Pennsylvanians Tax Credit (WPTC) into law as part of the $50.1 billion budget, making Pennsylvania the 32nd state to offer a tax benefit to low-income workers. The federal Earned Income Tax Credit (EITC) is widely viewed as one of the largest and most effective anti-poverty programs for working-age people and families with children in the U.S. Pennsylvania’s new earned income tax credit borrows its design from the federal program, and includes design elements aligned with evidence from Penn LDI researchers. The WPTC is projected to provide $193 million in tax relief to nearly 1 million Pennsylvanians.

A bipartisan policy in the works since 2023, the WPTC is equal to 10% of the federal Earned Income Tax Credit for qualifying filers. Working families with dependents could receive up to $805 through the WPTC, while the average credit is expected to be around $240.

As the General Assembly considered the issue as part of the 2024 budget cycle, in July 2024, LDI Senior Fellows Aditi Vasan, Aaron Richterman, George Dalembert. and LDI Director of Policy Strategy Julia Hinckley briefed members of the Pennsylvania General Assembly and Governor Shapiro’s Office on the health impacts of tax credits for low income residents.

Research has shown that similar benefits—such as the expanded Child Tax Credit (eCTC)— led to health improvements. A study by LDI Senior Fellows Aditi Vasan, Chén Kenyon, and Meredith Matone found that parents who received monthly eCTC payments during pregnancy had healthier babies than those who didn’t receive such payments, with lower rates of preterm birth and low birthweight. Other studies have shown that the eCTC was associated with improved self-reported health, depression, and anxiety for low income adults, lower rates of child injury and behavior problems, and less food insecurity.

LDI Senior Fellows provided evidence to lawmakers that many families spent eCTC dollars on essentials like food, utility bills, and childcare, and that the eCTC did not make people less likely to work, addressing common concerns around tax credits.

To maximize the impact of a state earned income tax credit, LDI Senior Fellows recommended in the briefings and in an op-ed that the tax credit be refundable, so that the lowest-income individuals could qualify for full benefits, and that it be administratively simple.

These key design principles were incorporated into the new WPTC. Starting from the 2025 tax year, Pennsylvanians who qualify and file for the federal EITC will automatically receive the WPTC. And the WPTC is refundable, so families can receive money back even if the credit exceeds the amount of taxes they owe, meaning that the lowest income residents will not be missed.

The new program will be implemented soon, as Pennsylvanians file their taxes in early 2026. State Rep. Christina Sappey, D-Chester County, who spearheaded the WPTC legislation, hopes that “this new tax credit will support working families and benefit our economy.”

LDI researchers look forward to opportunities to evaluate the WPTC’s impact and contribute to the program’s evidence-based improvements and potential expansions as it rolls out.