Greenwich Time

Lamont seeks to boost tax credit for low-income workers

- DAN HAAR dhaar@hearstmedi­

Gov. Ned Lamont will propose an increase in the state’s earnedinco­me tax credit to 40 percent of the federal level in his upcoming budget, upping the tax relief available starting next year for Connecticu­t’s neediest working families.

The EITC, as it’s widely known, would move from the current 30.5 percent of the federal payment in Connecticu­t to the higher level, permanentl­y, at an added cost of about $45 million per year. It has been as high as 41.5 percent temporaril­y during the pandemic, with the added money coming from federal COVID relief money.

EITC goes to about 211,000 households in Connecticu­t, so the average family would see an increase of just over $200 a year. Many would see much more, as the maximum added benefit would be about $700 under Lamont’s plan.

Lamont rolled it out Monday at a YMCA in Hartford’s North End as part of the slow release of his state tax and spending plan for the two fiscal years starting July 1, which he will present to the legislatur­e on Feb. 8. This is one of the less controvers­ial proposals he will make.

“I think it’s probably the most important and effective way that we can get a couple thousand dollars, depending on the number of kids, your income bracket, to make life…a little more affordable in the most family-friendly state in the country,” Lamont said Monday.

He added, “This is the first time in my life I’ve seen Anne Hughes and Richard Nixon mentioned in the exact same phrase!”

Hughes, a Democratic state Representa­tive from Easton, is arguably the most liberal member of the General Assembly. Nixon, a Republican president who would be a Democrat today based on his economic policies, proposed the EITC under the label “negative income tax.”

The program was embraced by former President Ronald Reagan, a moderate Republican who we thought was an arch-conservati­ve before we knew what a true farright leader looked like.

Republican­s tend to favor the EITC over straight government handout programs because it offers a tax rebate or a cash payment only to people with jobs. Dems like it because it very efficientl­y moves cash where it’s needed every year to address poverty.

“The money that they receive immediatel­y goes back into circulatio­n to pay for transporta­tion, for food, for clothing, for rent,” said state Senate President ProTem Martin Looney, D-New Haven, who fought for a state EITC for 13 years until it was finally adopted in 2011.

It’s still unknown how much total tax relief Lamont will ask lawmakers to pass. Earlier this month he said he would offer $60 million in tax relief to small business owners under a complex arrangemen­t known as the pass-through entity tax and he has said he would like to end a corporate earnings surcharge that collects about $80 million to $100 million a year from large and midsize companies, though he has not confirmed he will propose that.

In the big nut, Lamont has said he will seek to lower the state income tax rates for middle-class wage and salary earners, up to $150,000 or perhaps $200,000 for married couples, and half of those amounts for people filing singly. Lamont has yet to release his exact plan for the middle-class tax cut but told me in a Dec. 22 interview that he’d like to reduce rates from 5 percent to 4.5 percent for middleinco­me earners. That would be worth $450 for a family with a $90,000 income.

Lamont is under pressure from all sides to cut more taxes and boost spending on programs deemed worthy, because the state is on track to see a $3.2 billion surplus this year, following a surplus of more than $5 billion last year. The governor has taken a cautious approach amid early signs of an economic slowdown – and because he prefers to accrue the surpluses and use the money to bolster the state’s badly underfunde­d pension funds.

The EITC money is available in staggered amounts under a schedule, with more money going to people who earn less, above a certain

amount; and more to families with more children, up to three. For example, a household with three dependent and qualifying children will be eligible to receive as much as $7,430 through the federal EITC in 2024.

In Connecticu­t, that family at the maximum for three children would receive $2,968 on top of the federal dollars at the 40 percent rate. Most families receive less. The program phases down to zero payouts at $63,698 of 2023 income for married couples filing jointly with three children. It phases out at lower amounts for people filing individual­ly or for people with fewer children.

It’s technicall­y a credit against the state income tax but because it’s “fully refundable,” meaning a household doesn’t have to pay the state income tax to receive it, the EITC often arrives as a cash payment.

Upping the state credit to 40 percent would move Connecticu­t into the top 5 states for largest EITC credits. Massachuse­tts and New York both offer 30 percent of the federal rate. California and South Carolina are among the states with a higher credit.

Connecticu­t’s rate started at 30 percent in 2011, then went down and up and back down again to 23 percent in the budget crisis of 2011, then moved back up to its current 30.5 percent in 2021.

Lamont and other supporters view the EITC as pro-growth. “I need these folks working, I need our essential workers, I need people in the workforce,” he said. “The earned-income tax credit gives you one more reason to do that.”

 ?? ??
 ?? Ned Gerard / Hearst Connecticu­t Media ?? State Sen. Martin Looney, shown in Norwalk, has been a vocal champion for a state earned-income tax credit to help the poor.
Ned Gerard / Hearst Connecticu­t Media State Sen. Martin Looney, shown in Norwalk, has been a vocal champion for a state earned-income tax credit to help the poor.

Newspapers in English

Newspapers from United States