Finance, Revenue and Bonding Committee
April 3, 2023
Submitted by: Stephen Wanczyk-Karp, LMSW
On behalf of the National Association of Social Workers, CT Chapter the state’s largest organization of social workers, we present this testimony on the Earned Income Tax Credit (EITC), Child Tax Credit (CTC) and exemptions to certain types of retirement income.
According to the current Asset Limited Income Constrained Employed (ALICE) report nearly 40% of households across our state were living paycheck to paycheck even before the onset of the COVID-19 pandemic. Despite working hard at the jobs available to them, these households struggle to afford life’s basic necessities such as housing, food, child care, transportation, technology, and healthcare. Permanently increasing the CT EITC rate to 40% will provide struggling CT households with much needed income.
Increasing the CT EITC is an issue of equity: an increased EITC would benefit Black, Latinx, and female headed households who are disproportionately represented in the ALICE population, and who have been disproportionately impacted by COVID.
Expanding the EITC for low-income families in Connecticut would have a variety of benefits for those who receive this needed assistance. According to the Centers for Disease Control, “[b]y reducing poverty and increasing income for working families, EITC has been linked to positive health outcomes, particularly for infants and mothers.” [1] Moreover, more significant health improvements occur when more generous EITC benefits are provided.
The benefits of increasing the EITC go beyond health impacts, however. The CDC reports that, “in addition to positive health changes, earned income tax credits are also linked to increased economic activity at state and local level.”[2] For every EITC dollar a recipient earns, they return $1.24 to the economy – supporting local businesses and communities as they meet family needs.[3] Eligible individuals will spend their tax credit on items such as clothing, food, rent, car repairs, appliance replacements, etc. that are necessities of life. Such purchases are often made in their own communities, thus supporting local businesses.
The EITC does however leave out two groups: families with very low or no work income and families who earn more than $60,000 annually. The latter may sound like sufficient income however given the costs of residing in CT it still leaves many families living paycheck to paycheck. The EITC needs to address both of these groups by expansion of eligibility.
We also support making permanent the CTC. Like the EITC the CTC has proven to be an effective anti-poverty measure. Providing families with children the CTC helps to assure that children’s needs can be met that lead to increased child wellness.
As social workers, we see the ravages of poverty and economic deprivation, and as a result, we are keenly aware of the positives of increasing the EITC and making the CTC permanent.
NASW/CT also calls on the Finance, Revenue and Bonding Committee to fix the current cliff in certain exempt retirement income eligibility. As you may be aware, in 2019 Connecticut implemented changes to its tax code that fully exempts certain types of retirement income for persons with incomes under limits based on federal adjusted gross income (AGI). Specifically, if an individual tax filer has a federal AGI under $75,000 and a couple filing jointly has a federal AGI under $100,000, Social Security income and pension income are fully exempted. In addition, starting in 2023 exemptions for IRA withdrawals will be phased in over a period of four years, but the exemption will only apply to the same thresholds stated above ($75,000/$100,000). Unfortunately, if an individual goes over this income limit by even $1.00, they can owe thousands more dollars in taxes. There needs to be an incremental reduction in the tax exemption that removes the current cliff.
Thank you for your consideration of these important issues.
[1] https://www.cdc.gov/policy/hst/hi5/taxcredits/index.html#
[2] IBID.
[3] Moody’s Analytics estimate of financial multiplier
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