Lawmakers consider permanent tax credit and other tax cuts | Connecticut News

ByRichard C. Sloan

Mar 2, 2022

By SUSAN HAIGH, Associated Press

HARTFORD, Conn. (AP) — An income tax credit that was expanded during the pandemic should be made permanent, top Democrats in the Connecticut Legislature proposed Wednesday. The increased tax credit for low-to-middle income workers and families is set to expire on July 1.

It’s one of nearly a dozen proposals from state lawmakers this year to cut taxes, now that Connecticut’s economy appears to be improving. And it comes after a State Tax Services Department study of the total tax burden of residents, released this week, showed that low-income taxpayers pay a higher percentage of their income in state taxes and premises than higher-income taxpayers.

The General Assembly’s Committee on Revenue and Bonds will hold a public hearing Thursday on the tax proposals presented at this session, including making the earned income tax credit change permanent, reducing the sales tax by 6, 35% from the state and create various state personal income tax exemptions.

“We have to be serious, as Democrats and Republicans, about tax reform,” said Rep. Sean Scanlon, D-Guilford, co-chair of the tax committee, which supports making the expanded earned income tax credit permanent. “There are many other ideas. It’s a down payment on what we can do this year as a session.”

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In December, Democratic Gov. Ned Lamont announced that nearly 200,000 low-to-moderate income families in Connecticut who benefit from the state’s working income tax credit program would receive an additional tax refund check. . Using $75 million in federal pandemic funds, the state retroactively increased the 2020 tax credit from 23% of the federal earned income tax credit to 41.5% for eligible households who earned up to $56,844 in 2020 and have applied for EITC 2020.

The amount of each household’s payment depended on the size of their federal tax credit, which the IRS calculates based on the taxpayer’s income, marital status and number of eligible children. A single parent of two children, for example, whose income meets the federal poverty level and who received a state credit of $1,246 in the spring of 2021 received an additional $1,002, according to Lamont’s office.

Senate Pro Tempore Speaker Martin Looney, D-New Haven, and House Speaker Matt Ritter, D-Hartford, said Wednesday they want to make the 41.5% rate permanent. It could cost about $42 million and would come from the General Fund, the state’s main spending account, Ritter said.

The two legislative leaders acknowledged that the figure could be subject to negotiation. They are also interested in a new child tax credit, similar to the federal tax credit program. Meanwhile, the governor says he prefers to increase the local property tax credit against personal income and cap local car taxes — both are in his state budget proposal.

The governor wants to accelerate the planned phased exemption of income from pensions and annuities from personal income tax, as well as expand eligibility for a student loan tax credit program for employers who help repay their workers’ loans.

Meanwhile, Legislative Republicans want to lower the state’s 6.35% sales tax rate to 5.99% through the rest of 2022 to help mitigate the impact of inflation. Senate Minority Leader Kevin Kelly, R-Stratford, said Wednesday that the GOP is considering possibly extending the tax cut even further or making it permanent.

“We will seek to give more relief to families in Connecticut. And the advantage of this sales tax reduction is that it applies to everyone. It can be implemented now,” he said, not ruling out support for making the earned income tax credit change permanent.

“Believe me, Republicans will always have an open mind and want a conversation about any kind of tax relief for Connecticut families,” Kelly said. “But this (sales tax cut) is better because it can help them today rather than a tax credit next year, after they’ve already paid state taxes.”

Kelly said the fact that Democrats are proposing tax cuts shows they got the state’s tax policies wrong.

“They’re acting like they haven’t helped put this financial harm and these taxes on the backs of our families,” Kelly said, listing tax increases in recent years that he said families lower and middle classes had to assume. “I hope the people of the State of Connecticut understand who is responsible for this tax burden.”

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