Tax Relief

Lamont makes use of federal COVID funds to fund a one-time tax break for the poor

Governor Ned Lamont

Governor Ned Lamont will redirect $ 75 million of expiring federal COVID-19 relief into one-time state income tax refunds for the working poor of Connecticut in late February.

However, the announcement sparked mixed reactions on Wednesday when Republicans found the relief – about $ 377 for each of nearly 200,000 households – on Lamont’s political footing just as the Democratic governor enters his re-election year.

It also comes because Lamont faces ongoing criticism from progressive Democrats for failing to keep a 2018 campaign promise to extend government tax breaks for the poor and middle class.

“The 2020 Connecticut Income Tax Credit improvement will provide direct relief for workers doing their best to provide for their families while facing pandemic-related costs from masks and tests to childcare and internet access,” said the governor who named the credit “one” of the best anti-poverty tools we have. The EITC promotes work, strengthens economic stability and encourages future generations. “

In 2011, the state EITC was introduced to offset Connecticut income tax, which is 30% of the federal credit of the same name. But over the past decade, as governors and legislatures struggled with numerous budget deficits, the loan has been reduced to 23% of the federal EITC.

Lamont ordered a one-time, retroactive increase in the government loan to 41.5% specifically for the 2020 tax year.

An estimated 198,708 households with incomes of $ 56,844 or less qualified for the government loan last year, receiving an average of about $ 525. The amount of the extended loan for each household is checked as required and, in addition to the amount of the federal loan, depends on several factors, including income, marital status and children.

Lamont’s order would increase each household’s state income tax refund by an average of $ 377.

The $ 75 million Lamont would use to fund this tax break includes federal COVID-19 aid funds that states must spend – or expire – by Thursday.

Working poor attorneys praise Lamont

The governor quickly garnered praise from supporters of tax breaks.

Senate President Pro Tem Martin M. Looney, D-New Haven, said the aid will hit the neediest households “who suffered immeasurably during the height of the pandemic.”

And Rep. Sean Scanlon, D-Guilford, co-chair of the Legislature’s Finance Committee on Tax Returns, added, “These families will have a much-needed extra boost at a time when they need them most.”

A temporary increase in federal income tax child tax credits earned many Connecticut families an additional $ 1,000 to $ 1,600 per child this year.

But that expansion expires this month, and a Washington-based fiscal think tank estimates there are more than 600,000 Connecticut children living in households that will lose this expanded tax break by January.

To make matters worse, by early September, state improvements to state unemployment benefits, which added up to $ 300 a week, were dropped.

Lisa Tepper Bates, President and CEO of the United Way of Connecticut, called this a “big blow” for many families, even as a recent surge in Omicron-related COVID-19 cases hits Connecticut.

“As Omicron peaks are rising and we are asking people to isolate themselves in the event of illness or quarantine if they have been exposed, there are many Connecticut residents who simply cannot afford to go without pay.”

Bates added that the state-run EITC is an excellent stimulus package, with low-income earners spending almost all of the reimbursement on utility bills, groceries and other basic necessities.

Lamont’s Order: Aid to the Poor or Campaign Policy?

But while Omicron is dominating the headlines, Connecticut is also close to kicking off a gubernatorial year on Saturday, and the timing of Lamont’s order – coupled with the moderate Democrat’s checkered past on tax breaks – raised concerns with the GOP.

Lamont, a Greenwich businessman, campaigned heavily in 2018 for a pledge to lower state income taxes for the poor and middle class by expanding a loan that offsets the cost of onerous Connecticut communal property taxes. But Lamont chose not to keep that promise after realizing that it would be difficult to get relief without also raising state tax rates for the rich. The governor said he believed this would encourage wealthy families to leave the state.

The governor has launched a finance committee plan to permanently increase the state’s EITC to 40% of federal loans to order other income tax breaks for the poor and middle class – because there are hundreds of millions of dollars in tax increases for the rich and others brought about large corporations.

Lamont and lawmakers agreed last spring to raise the state EITC to 30.5% from tax year 2021 and tax returns filed in spring 2022.

Vincent J. Candelora, the House Minority Leader, R-North Branford, noted that the federal aid that Lamont uses to support the poor has been mainly used for COVID-19 testing, as well as for masks and other protective gear.

Connecticut’s health and education programs still need those dollars, Candelora added, more than a subset of the governor’s political base.

“It amazes me that we are in the middle of yet another wave of this pandemic, our school systems are buckled up, our teachers and health workers are exhausted, and people in our communities are lining up to compete for test kits, and” the governor decides to help his base politically, ”said Candelora.

Republicans noted that GOP Governor John Rowland proposed and approved a tax rebate of $ 50 per person when he ran for re-election in 1998, and Democratic Governor Dannel P. Malloy a rebate of $ 55 – Dollars per person suggested when it is due to come back into force in January 2014. Malloy withdrew his proposal a few months later when government revenue forecasts fell. But both involved returning state tax revenues, not federal grants, to Connecticut taxpayers.

Republicans also noted that legislature passed a bill this spring that requires Lamont to work with them to spend funds under the American Rescue Plan Act – the largest wave of federal aid in 2021 – especially because the governor is the Ignoring legislative proposals while spending previous rounds of federal aid.

“This governor continues to showcase Fiat’s separation of powers and transparency and rule,” said former House Minority Leader Themis Klarides, a Derby Republican running for governor.

Klarides added, “This Democratic governor continues to believe that the best way to help people is to simply give them money instead of creating an economy where people can get well-paid jobs.”

Lamont’s 2018 governor, Madison businessman Bob Stefanowski, is also expected to run again in 2022.

“The governor should have used this COVID money to provide more tests for residents who stand in line for hours during their vacation,” said Stefanowski, “instead of bypassing lawmakers again to get a one-time check from obvious political To issue reasons “. . “

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