New Haven’s Sen. Martin Looney, a long-time rallier for a state tax credit for the working poor, took hope in a vote that may bring cities an economic stimulus plan.
Looney has been rallying for a state version of the federal Earned Income Tax Credit for over six years. The federal program, a tax refund for the working poor, has been touted by politicians red and blue, including Ronald Reagan, as the single most effective anti-poverty initiative. Formed in 1975 as a way to get the poor off the public dime and into the workforce, the federal program offers up to a $4,700 tax refund for people who pay income and payroll tax.
Tuesday, the legislature’s Finance, Revenue and Bonding Committee approved a bill by a vote of 40 to 13 that would piggyback onto the federal program, allowing taxpayers to claim a state tax credit equal to 10 percent of their federal EITC benefit.
Twenty-two states have state versions of the EITC program. Those eligible for the federal program range from individuals making less than $12,000 to families of four making less than $40,000. A married couple with two kids, earning less than $39,783 per year, would get up to $4,716 in a federal tax refund. Under the CT proposal the family would also get a $472 check from the state.
Statewide, a total 166,000 Connecticut residents received federal EITC last year, earning $290 million in credits. The state proposal would return an extra $29 million in tax rebates.
The proposal would have a major impact in urban centers like New Haven. Almost 47,000 New Haven residents claimed federal EITC benefits by the latest count, claiming over $21 million in benefits. By that estimate, the state bill would put an extra $2.1 million in their collective pockets.
A Stimulus Plan
Supporters call the proposal not just a tax credit, but an economic stimulus plan.
The money that came back would likely be recycled into the economy immediately, Looney argued. Since a lot of people who receive EITC are living essentially hand to mouth, the money would go to buy groceries, pay bills, fix a car or pay a landlord — it would be a stimulus for cities like New Haven in a time of an economic downturn.
Last year, the proposal made it to the final three hours of drawn-out budget negotiations. “EITC was the one issue holding up a budget agreement,” recalled New Haven’s State Rep. Cam Staples, who co-chairs the Finance Committee and strongly supports the bill.
Looney and Staples both took hope in growing bipartisan support around the measure.
Republican Sen. Tony Guglielmo of Stafford, who sits on the finance committee, reminded the room Tuesday that the measure is a Republican initiative, heralded by Ronald Reagan.
He said the need for EITC hit home for him when constituents told him they were buying kerosene to put in home heating fuel tanks. Why kerosene? They couldn’t afford the delivery minimum for home heating oil, they told him. “Four hundred dollars to someone like that is a big deal,” Guglielmo said.
This year, Guglielmo has been joined by Republican Senate Minority Leader John McKinney in supporting the bill.
“It is the number-one tool for reducing poverty in Connecticut,” lauded state Rep. Mary Mushinski of Wallingford.
One criticism of the state EITC is that since Connecticut income tax thresholds are so high, most of the people who would qualify for the state EITC would not be paying state income tax. Looney countered that those people are already paying a good chunk of their income through the gas and sales taxes, which are regressive.
A Tough Budget Year
Despite a feeling of increased momentum behind EITC, no one was trumpeting victory yet.
Sen. Eileen Daily, co-chair of the Finance Committee, noted that the state would have to see where revenues stand after April 15 to see whether the measure is affordable.
No specific proposal has been made as to how the lost $29 million would be replaced, and the Appropriations Committee did not account for that loss in revenue in its recently approved spending plan.
While there’s been a growing consensus among Democrats over the years, and more bipartisan support for the idea this year, a good deal of opposition still stands in the proposal’s way.
Other Republicans, including Gov. M. Jodi Rell, favor spending a smaller sum, a few hundred thousand dollars, to do outreach to families who qualify for federal EITC but have not claimed their benefits. An estimated $65 million in unclaimed federal dollars is waiting to be claimed. An amendment that would have allocated $500,000 outreach funds instead of creating the tax credit was proposed and rejected during Tuesday’s finance meeting.
Chris Cooper, the governor’s spokesman, said Rell remains opposed to the state EITC that passed through committee Tuesday. “Something that would cost that much money is probably not in the cards in these economic times.”
Staples said EITC will remain “a top priority” for Democrats as they go through budget negotiations. “With a downturn in the economy, it’s even more essential,” he said. “The working pour could be moved one way or the other in ability to maintain jobs and homes.”