Some thought Gov. Dannel P. Malloy was crazy when he decided to dedicate $110 million of the state budget to a tax credit for the working poor, but a new report from Connecticut Voices for Children’s Fiscal Policy Center and the Connecticut Association for Human Services shows more than 180,000 households benefited.
Working families in every town in the state benefited from the credit and received an average of $601 back from the state after filing their tax return, according to the report. Households claiming the credit had average incomes of about $18,000 a year, which is what a single parent working full-time just above the minimum wage would earn before paying taxes.
Connecticut’s Earned Income Tax Credit is 30 percent of a filer’s federal tax credit and it was first adopted as part of the two-year budget in 2011.
The credit came in slightly under budget with $109.2 million being spent, but with the state facing a $2.3 billion deficit over the next two years everything will be on the table.
“We are concerned,” Wade Gibson, senior policy fellow at Connecticut Voices’ Fiscal Policy Center, said Thursday. However, “from our perspective we know the state is facing a sizable deficit and everything is on the table, and we just want to make sure folks look at other things before going to the EITC.”
He said every single dollar from the EITC goes right back into the economy.
These are families living paycheck-to-paycheck so the extra money goes to pay bills or buy groceries or clothing, Gibson said. In many instances, it’s used just to play “catch up.”
Sen. Majority Leader Martin Looney of New Haven, a proponent of the tax credit since 1999, has said it empowers urban families, but it is by no means an exclusively urban program.
“There are EITC recipients in just about every community in the state,” Looney said back in 2011.
Turns out he was right. According to the report released Thursday families in all 169 municipalities benefited from the credit.
In wealthier shorelines towns like Greenwich and Westbrook, 1,218 and 218 households benefited from the credit respectively.
It also gave a boost to residents in the state’s three largest cities. In New Haven 11,631 benefited. In Hartford, 16,121 benefited. And in Bridgeport, 15,703 benefited.
Click here for a town-by-town breakdown.
Gibson said the EITC makes Connecticut’s tax code less regressive and encouraged lawmakers to look elsewhere for budget cuts.
“Connecticut remains a state where folks in the bottom 20 percent pay 11 percent of their income in state and local taxes, while folks who make more than a million a year pay 5.5 percent of their income in state and local taxes,” Gibson said Thursday.
Opponents of the tax credit often argue the state is giving money away to households that don’t pay any state income taxes. But advocates of the tax credit say that’s a narrow way of looking at a tax system where some of the poorest residents pay more in sales, gas, and property taxes than the wealthiest residents.
“Connecticut has taken a giant step forward with the state’s EITC,” Jim Horan, executive director of the Connecticut Association of Human Services, said. “If we go backward, and take money out of the pockets of hardworking families, we are taking money away from the communities where they spend that money, and we are jeopardizing our fragile economic recovery.”
The report was released Thursday in anticipation of the start of the tax filing season.
Workers who earned $50,270 or less in 2012 and were raising children, and single workers without children who earned $13,980 or less, may qualify for the credit this year.