Tax fairness study in Connecticut sparks competing visions for relief
Connecticut Senate President Martin Looney announced a proposal by Democrats to expand the state’s earned income tax credit (EITC) to 41.5%. It’s one of a few long-sought proposals to alleviate tax burdened low-income people and communities of color in the state.
“When I came into the Legislature as a freshman in 2011, Governor Dannel Malloy was newly elected, and that was the first year that Connecticut adopted an earned income tax credit,” House Speaker Matthew Ritter said.
“And that was championed and led and came to fruition because of one man,” he said, thanking Looney for leading the fight to increase the EITC over the current limit of 31.5%.
If passed, this would be the highest EITC in Connecticut’s history.
Democrats united and divided
The proposal by Democratic leaders was announced the same day Democratic Governor Ned Lamont urged support for his $336 million in tax relief for state residents this legislative session, while the state’s Black and Puerto Rican Caucus also pressed for more systemic changes to help address Connecticut’s racial income disparities.
“Property tax is a tough tax,” Lamont said. “It’s relentless. Anything we can do to reduce that property tax is another savings that I hope makes a real difference for people.”
Ritter said the state Democratic Party is divided about the best way to address tax fairness in Connecticut, but said the party was able to compromise to find a way to help “poor, hard working people” in Connecticut.
He also said he expects bipartisan support for the new EITC.
A report released Monday by the state Department of Revenue Services showed middle class and working class residents paid a disproportionate amount of taxes compared to the wealthy.
People who earned less than $44,700 in 2019 lost nearly 26% of their earnings to taxes. That is nearly four times the rate paid by Connecticut’s wealthiest families. Those making up to $74,700 paid nearly three times more in taxes.
State Representative Sean Scanlon, a Democrat, said the report proves why Lamont’s proposal is necessary. Lamont’s legislation is being considered in the state’s Finance, Revenue and Bonding Committee, which Scanlon chairs.
“Obviously with the cost of goods going up through inflation, an extra few hundred dollars per year would go a long way and that’s exactly why we’re fighting for tax reform,” Scanlon said.
State Representative Toni Walker, a Democrat of New Haven, said that when she saw that almost 49% of the people in Connecticut who pay taxes make less than $50,000 a year, her heart “stopped.”
“We in Connecticut need to do better,” Walker said. “We need to look harder at the things that we can do to help people of this state.”
During a briefing on the legislative priorities of the state’s Black and Puerto Rican caucus, State Representative Douglas McCrory, a Democrat of Hartford, referenced recent research he conducted on an unnamed state agency that invests $1 billion a year into goods and services, with 95% of that money going to white men and only 0.1% going to the Black and Brown community.
“We have major inequities in opportunity and economics in the state of Connecticut when it comes to Black and Brown people,” McCrory said.
Scanlon, who is running for state comptroller in the November election, said he grew up in a low-income household, and that the extra few hundred dollars provided by the new EITC could make all the difference.
“I grew up raised by a single mom,” Scanlon said. “It was very difficult for her to put food on the table, put clothes on my back. A few hundred additional dollars in this moment in time, with inflation, is additional car payments. It's additional trips to the grocery store. It's additional gas, trips to work. That will matter to these families.”
If Lamont passes the EITC proposal, the tax credit will be put into effect during tax year 2023.
However, the governor said Monday that he would not support making the new EITC permanent. The state revenue services commissioner warned against too much future fiscal uncertainty.
This did not discourage Ritter or Looney, who said they were confident the credit would increase to 41.5%, and that they would be able to convince the governor to keep it there.
“Marty and I are wonderful at winning people over,” Ritter said.