Low-income tax relief built into house plan
BOSTON (SHNS) – House and Senate leaders have made clear they intend to move forward with a tax refund program limited to people earning at least $38,000 a year. , but they’ve also repeatedly pushed back against the idea that their tax relief plans exclude the state’s lowest-income residents.
Progressives have cried foul as the Legislature introduces a bill (H 5007) that includes a series of tax code changes and $250 direct payments to residents who earned between $38,000 and $100,000 l last year, arguing that putting a minimum income on the rebate program ignores the needs of residents who earn less than that, but also struggle to cope with soaring inflation and energy costs. Legislative leaders say they have already targeted low-income residents with a pandemic bounty program that saw $500 checks go out earlier this year and tried to draw attention to how other provisions of the bill could help these Bay Staters.
“The tax changes are permanent. They affect all low-income people. So there is a significant amount here for those under 38 [thousand dollars a year]House Speaker Ronald Mariano said earlier this week. “Even if they don’t specifically get a direct refund, they will get permanent tax relief.”
When the House presented the floor on Wednesday with the mammoth economic development package that serves as the vehicle for tax rebates and reforms agreed to by a few people at the top of each branch, revenue committee chairman Rep. Mark Cusack detailed to the representatives the various other provisions which the leaders believe meet the needs of low-income residents and families.
Raising the Child and Dependent Tax Credit to $310 per dependent and removing the cap will provide more than $130 million in assistance to more than 700,000 families, he said. Increasing the main circuit breaker credit to $1,755 will provide more than $60 million in tax relief for more than 100,000 seniors, Cusack said. Raising the rent deduction to $4,000 will provide relief to more than 880,000 residents, he said, and estate tax changes would provide relief for about 2,500 filers each year.
And increasing the level of the state Earned Income Tax Credit (EITC) from 30% of the federal credit to 40% would help nearly 400,000 families earning less than $57,000 a year and provide relief of more than $91 million, Cusack said.
“So through these five tax deductions, combined with our unique reimbursement scheme, we are providing over $1 billion in direct assistance in this package to citizens of the Commonwealth,” he said. “And I urge my colleagues to be proud of it, to go out and sell it, and let people know that they’re getting their money back from us – over a billion dollars.”
Senate Speaker Karen Spilka, who more or less slammed the door Wednesday on removing the income floor for refunds, also drew attention to the rent deduction, child and dependent credit. load and the main circuit breaker when pressed to respond to the argument that low-income residents are being left behind. She also pointed to the rise of the EITC, which has been recognized by Democrats and Republicans as one of the most effective tools to fight poverty.
“EITC – which has been a priority of the Senate for years, we did this a few years ago – we will increase the percentage to 40% of the federal. Research has shown you want to help low-income people and working families, the EITC is the best way to do that,” she told reporters. “It’s straight money in their pockets, then they turn around and put it back into the local economy. So it comes right back into the high street shops and into the local economy, which also boosts the local economy. The EITC was therefore a real priority for us to include in this package, as it will provide direct relief to low-income families.
The state EITC is available to “certain low-income individuals who have earned income” and meets federal tax credit requirements, according to the Department of Revenue. To qualify for the federal credit, a taxpayer must have worked full-time or part-time during the tax year and earned income below a certain threshold. For the 2021 tax year, those thresholds ranged from $21,430 for filers without children to $51,464 for filers with three or more children, the DOR said.
According to the Executive Office of Administration and Finance’s fiscal year 2021 tax expenditure budget, the EITC program was worth approximately $283.9 million to residents.
The EITC’s latest adjustment came in the fiscal year 2019 budget, when lawmakers and Governor Charlie Baker raised it from 23% to 30% of the federal benefit level. Baker has been very supportive of increases in the EITC in the past and even supported larger increases than the legislature was willing to allow.
When asked Wednesday night if she would be willing to scrap the reimbursement floor when the bill goes through the Senate, Spilka told reporters that while she “will never say no to almost anything, for this in particular , we will move forward.”