MARK PAZNIOKAS :: CTMIRROR.ORG
Failing to agree on a progressive plan to shift the large state tax burden from the middle class to the rich this year, Governor Ned Lamont and lawmakers agreed to take a modest hiatus this year for the working poor in Connecticut: an expansion of income tax credits.
Connecticut is not alone. Ten states either created or improved an income tax credit this year, and Delaware and the District of Columbia are weighing proposed improvements, according to a new analysis by the Center on Budget and Policy Priorities.
It is a refundable credit, which means it provides cash to eligible taxpayers rather than reducing a tax burden. And the concept was slow to come to Connecticut, despite the endorsement of Senate President Pro Tem Martin M. Looney, D-New Haven. A first version was created in 2011 when Governor Dannel P. Malloy took office as the first Democratic governor in two decades.
“We were the last state in our region to introduce a state income tax to introduce the EITC,” Looney said. “And that was because Gov. [John G.] Rowland and Gov. [M. Jodi] Rell had been against it since I first introduced it around 2000. And their argument was that it was a repayable loan. It’s a godsend for the people. It shows you how little they understood. “
Rowland and Rell were Malloy’s two Republican predecessors.
In the northeast, New Jersey has expanded its credit to approximately 90,000 taxpayers without children. Maryland strengthened its credit to 45% of the state EITC and expanded eligibility for immigrants without a Social Security number.
Currently 28 states and Puerto Rico offer an EITC. on to help working poor families save money.
Lamont, a Democrat slated for re-election next year, has a solid, if limited, record on key progressive labor issues: while arguing with the left over details, he has endorsed and signed a bill creating a paid family and sick leave program and another increase in the minimum wage of $ 10.10 in increments of $ 13 this month, $ 14 next year, and $ 15 in two years.
But he positioned himself as a centrist in tax policy and prevented the democratic legislature from increasing top tax rates. On Tuesday he was joined in New Haven by Looney, an ardent liberal who in various ways sparring partner and ally to the governor in promoting the EITC expansion.
A tax incidence study due early next year is sure to fuel renewed debate about tax justice in Connecticut in election year, but they took turns at a press conference on the lawn of Junta for Progressive Action, a community group that serves New Haven’s poorer Latino neighborhoods the reach of the expanded EITC and the mutual role in implementing it publicly.
Looney said the Democratic governor is central to the higher minimum wage and expanded tax credit, a tandem that, together, provides significant relief to the working poor.
“I think Governor Lamont has shown what it means to be committed to democratic principles this year,” Looney said.
Lamont returned the feeling.
“Sen. Looney has been a pioneer in personal income tax credits from the start. Every time he was in my office reminding me how important it is. And that’s what we’re 100% focused on, ”said Lamont. “I thought one thing early on: I want the work to pay off.”
Lamont said the research data is clear: “Numerous studies have shown that this tax credit is one of the best poverty reduction tools we can use because it boosts work, strengthens economic stability and encourages future generations.”
Connecticut’s credit is growing this tax year – with returns To be submitted in early 2022 – from 23% to 30.5% of the federal EITC. That means an additional $ 34.1 million per year, or about $ 176 for the approximately 194,000 eligible households, according to the legislature’s bipartisan Office of Fiscal Analysis.
To qualify for the state loan, an applicant must be eligible to receive the federal EITC. According to the IRS, examples of current income eligibility limits for the state EITC include $ 53,330 for a couple with two children, $ 41,756 for a single parent with one child, and $ 15,820 for a single without children.
A credit to State Income Tax, Connecticuts EITC was introduced in 2011 at 30% state tax break, but was then scaled back to 27% almost immediately. And in the past decade, when governors and legislatures struggled with numerous budget deficits, credit has been reduced to 23%.
Looney and other progressive lawmakers envisioned a much broader tax initiative, both in terms of the dollars involved and the financial spectrum of households involved.
The Legislature’s Committee on Finance, Revenue and Bonds had recommended a progressive plan to reset the state’s EITC to 40% of federal loans. That would have gone to working households more than $ 180 million a year, nearly $ 930 per family.
The panel had also hoped to give low- and middle-income households $ 600 per child – up to a maximum of $ 1,800 – of their state income taxes through a new child loan. That would cost Connecticut about $ 300 million a year, according to impartial analysts.
Lamont blocked this, however, on the grounds that it was unclear whether the state could afford this relief once the federal pandemic aid expires in 2024.
The finance panel had approved two different state income tax surcharges for households with annual incomes greater than $ 500,000 that Progressives believed would ensure Connecticut can maintain tax breaks for low- and middle-income households. It also recommended a new media advertising tax for online digital giants like Google and Facebook.
But Lamont blocked those measures, too, arguing that tax hikes would hamper Connecticut’s economic recovery from the coronavirus and hikes aimed only at the rich could cause them to flee the state. His view has not changed.
On Tuesday, the governor said he was in favor of the progressiveness of the federal tax law and President Joe Biden’s support for helping the poor and the working poor.
“Connecticut is not put at a disadvantage compared to Massachusetts, Rhode Island or Pennsylvania. It allows us to make sure we care for the people with the greatest needs, make sure we are there to support them, and that, “I think, is what we have to do,” Lamont said.
“If I need to increase income, I need to increase income,” he said. “At the moment we are in a very strong position as a state and that is not necessary.”