DES MOINES -- Low-income workers will get a $10 million tax break under legislation signed by Gov. Chet Culver Tuesday.

The bill, Senate File 590, increases the size of the state's Earned Income Tax Credit and makes it refundable. Culver signed the bill at the Old Capitol in Iowa City as part of his ongoing statewide tour to promote his legislative accomplishments.

In a statement, Culver said the increase would benefit 164,000 low-income households in Iowa. Under the bill, the credit will be equal to 7 percent of the larger federal earned income credit, up from 6.5 percent previously.

The maximum state credit for a household with two or more children earning $11,340 annually would rise from $295 to roughly $318, according to Tom Patterson of the Iowa House Democratic research staff.

But the bigger benefit to families, Patterson said, is that the credit now can be added into tax refunds. Iowa was one of just four states where the credit was not refundable.

Sen. Herman Quirmbach, D-Ames, said an increase in the credit is long overdue.

"It rewards work, and it's a tax cut that's targeted to the people who need the help the very most for supporting their families," Quirmbach said.

Republican lawmakers argued that the $10 million tax break is too small when compared to the $483 million in spending increases approved by the Democratic- controlled Legislature. GOP lawmakers offered a $25 million plan that would have bumped the credit to 15 percent, but it was defeated in the House and Senate.

Democrats countered that the earned income credit stood unchanged during several years of Republican control.

Rep. Jamie Van Fossen, R-Davenport, said the smaller bill is better than nothing.

"I think it was a good thing that it passed. In the long run, perhaps it will put money in folks' pockets," Van Fossen said.

Families with two or more children and incomes of up to $38,348 are eligible for the credit. The income level is lower for families with one child or no children.

Conatct Todd Dorman at (515) 243-0138 or todd.dorman@lee.net.