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Victory For Malloy As State Enacts EITC

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(Jessica Hill/AP Photo)

(Jessica Hill/AP Photo)

By STEPHEN SINGER,  AP Business Writer

HARTFORD, Conn. (AP) _ Connecticut’s new earned income tax credit will provide needed financial help to as many as 190,000 low-income workers, supporters say. Critics dismiss it as welfare.

The tax credit, part of the $40 billion, two-year budget signed  Wednesday by Gov. Dannel P. Malloy, is a major victory for the Democratic governor and Democrats who run the Legislature after being blocked for years by then-Gov. M. Jodi Rell, Malloy’s Republican predecessor.

Sen. Martin Looney, the Democrats’ leader in the state Senate, called it an economic stimulus for low-income workers.

“It recognizes that low-income workers have expenses tied to work that are more burdensome than for high-income workers,” he said, citing transportation and other necessities.

Malloy pushed for the tax credit in his budget address to the Legislature in February.

“It’s money for the basics too many of us take for granted,” the governor said. “It’s fair, it’s decent, it’s good public policy and it’s the right thing to do. Its time has come.”

Opponents say the $110 million cost of the credit is high at a time when state government is raising taxes and cutting spending to close a $3.3 billion budget deficit. Critics also say Democrats are pushing through too many tax increases that are used to justify the tax credit that will likely be paid to low-income taxpayers rather than given as a credit because their incomes are too low to be taxable.

“It’s a form of welfare,” said House Minority Leader Lawrence Cafero, a Republican from Norwalk. “We’re writing a check.”

Those eligible can claim 30 percent of the federal earned income tax credit. Cafero said the level is far too generous, recalling that Rell and fellow Republicans balked at a credit proposed at 5 percent of the federal amount in 2009.

The plan gives credits of $137 to $1,700 for single heads of  households with incomes of between $5,950 and $16,500 and up to $21,500 for joint tax filers.

Looney said the credit will help cushion the impact of the sales tax, which the Legislature and Malloy increased to 6.35 percent from 6 percent.

Cafero scoffed at the idea that low-income residents will buy enough items to recoup as much as $1,700 in sales tax. He said the Republican alternative was to not raise taxes.

“No increase in income taxes, no increase in sales taxes,” he said. “That was our alternative. There was no need to change it.”

However, the Connecticut Association for Community Action, which represents the state’s federally designated anti-poverty agencies, welcomed the earned income tax credit, particularly because the state budget cut funding for the agencies by 10 percent, a spokesman said.

“When compared with an alternative that could have included gouging the programs and services that help the state’s poorest residents, this ‘shared sacrifice’ approach was preferred and appreciated,” spokesman Derek Haviland said.

Edward J. Deak, an economist at Fairfield University, said the tax credit could force the state to make up for lost revenue by r ising taxes on upper-income residents who could flee for lower income states.

“It’s focusing on the share of the population that has a  greater ability to pay, but whether they’ll remain in Connecticut is a different question,” he said.

(Copyright 2011 by The Associated Press. All Rights Reserved.)

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