Friends, Nutmeggers, Countrymen, lend me your ears! Last November, Connecticut helped lead the Democratic charge, electing two new Congressmen to the Unite States House of Representatives. On the state level, we elected a veto-proof majority in both houses of the State Legislature. But we must remember, that we did not elect Democrats merely to crow about their (and our) victory. We elected Democrats to enact serious, progressive change. And that’s why I’m asking you to support a state earned income tax credit (EITC) for Connecticut.
What is EITC, you ask? EITC is a refundable income tax credit for low-income families It was first enacted on the federal level by President Ford in 1975, when it was implemented to offset the tax burden on poor families and provide an incentive to work. A state EITC would add 20% to the federal tax credit already claimed by many Connecticut residents. To be eligible for the EITC, parents must be employed. Under a 20% state EITC workers earning up to about $38,000 would increase their earnings by as much as $900. Currently, 21 states have created a state EITC, most recently New Mexico. Connecticut is the only state in New England with an income tax that does not have an EITC.
Why do we need an EITC? Connecticut is the richest state in the union but at the same time is the state with the largest income gap between the rich and the poor. Here are some telling statistics: Between 1990 and 2005, CT wage earners at the 10th percentile saw their real wages decline by 3% while wages of the earners at the 90th percentile increased by 19%. There are at least 86,000 children that live in poverty in Connecticut. And, EITC claimants live in every town in every zip code in Connecticut. As Democrats, we have a duty to do what we can to help our neighbors across the state.
In addition, EITC has a proven record reducing poverty: in 2004, EITC lifted 4.8 million people out of poverty. Researchers estimate that the child poverty rate would be 25 percent higher if not for EITC. The Democratic Party has always been the party concerned with the plight of those less fortunate. We have an obligation to help those who are working hard to pay their medical bills, put food on the table for their families, and save money to go to college. The EITC, because it only applies to families where a parent is working combines the best of anti poverty legislation with the American belief in individualism. You should have to work, but work should always pay.
Finally, EITC simply works. A 20% EITC as proposed could pump as much as 53,596,372 into local Connecticut economies according to the IRS. Research has found that the increased labor force participation caused by the federal EITC more than offsets the cost of EITC to other taxpayers. The Federal EITC has been shown to increase employment among women with young children. Lastly, local governments benefit greatly from EITC because people who receive this extra money use it locally to provide for the necessities of life.
Governor Rell’s original budget proposed a 600 million budget increase. The projected cost to the state for the EITC would be only 55 million.. This is legislation that is long overdue in Connecticut that can only pass with widespread support. To that effect, please call your state representative and state senator and urge them to include a 20% Refundable EITC in the Democratic Tax and Budget Package.