Electronic tax

The Day – Progressives urge Lamont to give permanent tax breaks to the poor

While Gov. Ned Lamont on Wednesday touted his intention to share one-time federal COVID relief funds with the working poor in Connecticut, progressive reformers then urged him to get permanent relief for low- and middle-income families. .

But that would require spending state money, not handing out aid from Washington – which the fiscally moderate to conservative governor has been wary of since the coronavirus hit Connecticut nearly two years ago.

“The reality is that many of these families were struggling before the pandemic, possibly during the pandemic, and they will struggle after the pandemic,” Sen. John Fonfara, D-Hartford said at a midday online press conference with Lamont .

The Democratic governor was touting plans to share $ 75 million in expiring federal coronavirus relief funds with nearly 200,000 working poor households in Connecticut – an average of about $ 375 per household.

To be eligible, these families had to be employed and qualified in 2020 for the Earned Income Tax Credit, or EITC, on their state income tax returns by earning less than $ 56,844.

“I think there is nothing more important than rewarding hard work,” Lamont said, adding that “essential workers sometimes did the most essential work at the lowest pay, and that is wrong.” .

Established in 2011, the Connecticut Earned Income Tax Credit is one of the state’s primary tools to help its poorest working families stay afloat. Initially valued at 30% of the federal EITC, it has since gotten smaller and stood at 23% in 2021.

An estimated 198,708 households received the credit, with an average value of $ 550, through income tax returns filed last spring. Advocates say poor families have to spend all that money on basic needs, such as utility bills and groceries, because of Connecticut’s high cost of living.

Lamont’s plan would increase the average EITC benefit, for one time, to nearly $ 930 on average, which is 41.5% of the federal EITC benefit.

“We really hope we can build on this and not make it a one-time effort,” said Lisa Tepper Bates, President and CEO of United Way of Connecticut.

United Way’s ALICE methodology – an acronym for Asset Limited, Income Constrained, Employed Households – argues that federal measures to assess poverty, especially in Connecticut, dramatically underestimate the problem.

The federal US Census Bureau poverty level for a family of four in Connecticut is $ 26,500. Only about 11% of the state’s households fall below this threshold. But the office’s metric focuses primarily on a household’s pre-tax income and the adjusted cost of a minimum diet – originally set in 1963. Key things like health and child care, transport, utilities and other housing costs are not major factors in FPL.

According to ALICE, the Connecticut family of four must earn $ 90,660 to cover their basic survival needs.

Connecticut Voices for Children, a progressive political group based in New Haven, has advocated in recent years for greater relief for low- and middle-income families through the EITC and other changes to the income tax. income of the states.

Emily Byrne, executive director of Connecticut Voices, called Lamont’s plan a “courageous first step,” then noted that U.S. census data currently shows 22 percent of renters in the state are behind on payments, and 646,000 adults here report difficulty meeting normal household expenses. .

The General Assembly’s finance, revenue and bonds committee proposed last spring to increase the state’s EITC from 23 percent to 40 percent of federal credit. Lawmakers and Lamont agreed to 30.5% from tax year 2022 in the final adopted budget.

The finance panel had proposed several other tax changes which were removed entirely.

Representative Sean Scanlon, D-Guilford, called for a new income tax credit of $ 600 per child for households earning $ 200,000 per year or less. To ensure that poor households – who often owe little or no state income taxes – can still benefit, Scanlon also proposed to make 70% of the credit repayable.

Fonfara, the other co-chair, recommended two income tax surcharges for the state’s wealthiest households and a new tax on digital media ads on major online giants like Google.

The Hartford lawmaker wanted most of the hundreds of millions of dollars in revenue from these tax hikes to invest in impoverished urban centers in Connecticut to reverse decades of unequal access to education, health care and services. economic opportunities. The revenues would also ensure that tax breaks for the poor and middle class could be sustained even after the temporary federal tax assistance linked to the pandemic expires in 2024.

Lamont argued that tax hikes would destabilize the economy at the worst possible time. The governor also strongly opposed increasing state taxes on Connecticut’s wealthiest households, arguing that it would prompt them to flee the state.

Fonfara responded by calling the new state budget “a knee on the neck of the black community” when the plan was debated in the Senate in June.

And since then, the state’s revenue projections have only increased. While Lamont and lawmakers have used nearly $ 1.8 billion in federal COVID aid to help balance the state’s finances in this fiscal year and next, the budget is on the verge of closing this alone. exercise to nearly $ 1.9 billion in the dark, according to Comptroller Natalie Braswell’s office.

“Income inequality was not created overnight, but it can be dramatically reduced with strong anti-poverty measures,” said AFL-CIO Connecticut President Ed Hawthorne , during Lamont’s press conference.

The union leader also urged Lamont to “capitalize on this effort” by supporting a new child tax credit, lowering state income tax rates for the poor and middle classes, and increasing taxes. state investments in urban centers.

These initiatives would likely unbalance the state’s finances, unless they were offset by an increase in taxes on high state incomes.

Lamont has said he is open to some form of state tax relief for low- and middle-income households during the next legislative session, which begins on February 9.

The governor said he preferred to focus on municipal property tax burdens.

Lamont reneged on his 2018 campaign pledge to inject an additional $ 400 million per year into low- and middle-income households by expanding the property tax credit by 2021. The administration argued that the state could not afford the relief, even though public finances are more robust now than when Lamont made the pledge in 2018.

The governor and the legislature increased municipal aid by about half that amount in the new state budget passed last June.

Still Lamont also said he hoped to make the state’s expansion of the EITC permanent, although he gave no indication that he was prepared to consider a massive tax redistribution plan that would affect wealthy Connecticut.

“We’re going to have to prioritize because… federal money doesn’t go forever. But this is an extremely important tax cut for working families. … We will do everything we can to keep this going.

Keith M. Phaneuf is a reporter for The Connecticut Mirror (www.ctmirror.org). Copyright 2022 © The Mirror of Connecticut.

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