Tax Credit Helps Working Poor

March 30, 2006
Editorial By Courant

When it comes to anti-poverty programs, even the toughest skeptic ought to have a soft spot for the federal earned income tax credit, which gives low-wage workers a leg up in the world. Connecticut should build on that success by enacting a state credit.

Created under the Ford administration in 1975, the federal earned income tax credit encourages low- and moderate-income families to join the work world by reducing their tax burdens and, in come cases, even supplementing their incomes. Studies show that 85 percent of the money generated by the federal program goes to families 200 percent below the poverty level; the money is typically spent on necessities, home repairs, vehicle purchases - even education and training.

During the 1990s, the program was credited with helping lift 7 million people out of poverty.

In Connecticut, state Sen. Martin Looney, a Democrat from New Haven, has introduced a bill that would create a similar credit for the state income tax by piggybacking on the federal program. Under Mr. Looney's proposal, people would get a refund on their state income taxes totaling 20 percent of whatever they are due under the federal program.

Lawmakers may debate the size of Mr. Looney's percentage (and probably will). After all, the projected $500 million surplus presents a chance to do a lot of important things for Connecticut - particularly, improving the state's business climate. But there's no arguing the merits of an earned income tax credit for Connecticut residents.

The cost of living is high. The residents who would benefit from a state tax credit, meanwhile, are Connecticut's working poor (for example, a family of four with an income of less than $37,000 or an individual earning less than $12,000). Many don't get the tax breaks enjoyed by higher-income residents for owning a car or a home. An earned income tax credit would help level the playing field - a least a little.

Eighteen states, plus the District of Columbia, have their own tax credit programs. If Connecticut were to adopt Mr. Looney's 20 percent solution, and if all of the state's 200,000 qualifying households took part, advocates say the program would cost about $50 million.

Considering that a state tax credit program would put a dent in child poverty and help families share the benefits of working and being productive members of society, that's not a cost so much as a social investment.