Recently the Connecticut Legislature’s Finance Committee passed their revenue package. It included an increase in the state-level earned income tax credit (EITC) and a broad middle-income tax cut, policies that were both part of Gov. Ned Lamont’s budget. These are good policies, and the legislature should be applauded for increasing the state EITC as a proven way to provide significant tax relief for our lower income families.
However, the governor is right when he says that more needs to be done for low- and middle-income families who are struggling.
Connecticut is now the only state that does not provide child-related exemptions or deductions from its personal income tax to support the cost of raising children.
Connecticut’s EITC, while providing support to low-income families with children, only reaches households earning up to $60,000 per year. The proposed revenue package leaves out more than 280,000 Connecticut ALICE families who either earn too little or too much. These ALICE families – Asset Limited, Income Constrained, Employed, an acronym we use to describe Connecticut residents who live paycheck-to-paycheck, or are falling behind – need help now.
A Connecticut Child Tax Credit (CTC) in addition to the state’s EITC could reduce child poverty by up to an estimated 50%. These resources for children and families are needed now, more than ever, due to significant cuts in federal tax benefits that are hitting families hard. Families are facing the expiration of the enhanced federal child and dependent care tax credits, and the expiration of the enhanced SNAP or “food stamp” benefit. The expiration of these benefits has cost families thousands of dollars in income that they were counting on to pay bills and put food on the table.
Connecticut can afford to pay for a child tax credit by making the right choices about how we use state resources, including by phasing out the state’s film tax credit to make available the funds needed for a child tax credit. A 2019 Department of Economic and Community Development (DECD) analysis of 10 years of Connecticut film tax credit program noted that Connecticut loses money on the program: “the additional revenues gained by the state do not compensate for the loss in state tax revenue.”
By contrast, Moody’s Analytics tells us that every $1 invested in a child tax credit creates an economic return of $1.25. The Child Tax Credit promotes family economic security and supports our economy at the same time. In FY 2022, the state spent $144.9 million on loss-making film tax credits, more than the state spent on the one-time child tax rebate last year, estimated initially at $125 million. Families showed us how important this policy is in 2022 – as 80% of eligible households took the time to pro-actively apply for it. Families have told us how much last year’s $250 per child tax rebate meant to them – making it possible to pay-off past-due bills, afford a needed car repair, or buy school clothes or supplies.
Hollywood does not need more of our state’s hard-earned money, but Connecticut families do. A state CTC provides families with needed resources now and yields a positive return for our economy. Let’s make good on the commitment to make our state the most family friendly state in the country by choosing to invest in Connecticut children through a state-level child tax credit! Governor Lamont, members of the General Assembly, what do you say?
Lisa Tepper Bates is President and CEO, United Way of Connecticut. She writes on behalf of the network of 15 local United Ways.