Backed by numerous advocacy groups, the Senate President Pro-Tem and Connecticut Comptroller, members of the Finance, Revenue and Bonding Committee heard testimony regarding a potential Connecticut child tax credit to help support low and middle-income families in the face of Connecticut’s high cost of living and inflationary pressures.
Citing statistics showing that child tax credits help alleviate poverty, Senate President Pro-Tem Martin Looney, D-New Haven, who proposed the bill, wrote in testimony that establishing a permanent tax credit is a “poverty fighting measure that has proven to be successful.”
During live testimony, Looney said the proposed child tax credit is structured in such a way to benefit middle-income families, as well: “It really does provide a benefit to middle-income families.”
The proposed bill would essentially make Connecticut’s 2022 child tax rebate, which returned $250 per child, up to three children, for families earning less than $210,000 per year, a permanent tax credit. The 2022 rebate, however, was done by application and was ultimately utilized by upwards of 80 percent of eligible families, leaving $25 million of budged $125 million on the table.
Similarly, the American Rescue Plan temporarily increased the federal child tax credit to upwards of $3,600 per child, sent out through a monthly check.
Supporters said the child tax credit should be built into the tax filing system so that it would not require applications in the future. Supporters also noted that the increased federal child tax credit passed under President Donald Trump’s tax package is set to expire in 2025 and means families will receive roughly $1,000 less in child tax credits.
Connecticut Comptroller Sean Scanlon said establishing a Connecticut Child Tax Credit is his “biggest passion.” As a legislator, Scanlon had proposed a higher tax credit of $600 per child.
However, with Gov. Ned Lamont proposing an income tax reduction for families earning less than $150,000 and increasing the Earned Income Tax Credit (EITC), Scanlon said getting all the tax decreases and credits through will likely require a balancing act.
“I do believe that a medley of those cuts, an EITC, a CTC, an income tax cut across the board will do great things to make the state more affordable which I think helps not only the families in Connecticut, but helps grow our economy, something we desperately need to do by making Connecticut a more affordable place to start a business, raise a family and do all the kind of things all of us want to see,” Scanlon said during testimony.
Lamont’s tax reduction proposals would amount to roughly $550 million in revenue reductions. Although there has yet to be an official estimate made on the potential cost of the child tax revenue, based on the 2022 rebate, it would likely be near to the $125 million budgeted for the rebate.
“If we know that there’s a problem, that its very expensive to live here in Connecticut and we want to tackle that, using the tax code is a very good way to do it,” Scanlon said. “I do believe that cutting taxes that represent younger people and families and those that are dealing with the most costs, does have a way a way of transferring beyond just helping them but helping the entire state and economy in general.”
Lisa Tepper Bates, president and chief executive office of the United Way of Connecticut said the EITC focuses on families making less than $60,000 per year, which they support, but leaves other families earning more but still facing similar difficulties without relief.
“The real cost of living in Connecticut if you have a toddler and a baby – these are the young families that we want to draw to our state and keep here – the real cost you’re up against is $110,000 per year given inflation,” Tepper Bates said. “With the EITC capping out with a family earning $60,000 per year, you’re missing a lot of families who really need that support.”
Connecticut has been enjoying budget surpluses the last several years, built on federal COVID dollars and increased income, sales and business tax revenues, and fiscal guardrails established in the 2017 budget. The surpluses have led to a full budget reserve fund and billions paid down in Connecticut’s pension debt.
Republicans have been pushing for tax decreases in the face of budget surpluses to help alleviate inflation pressures on Connecticut residents. Their proposals focused on income tax reductions, similar to Gov. Lamont’s, but also included reductions in the sales tax and eliminating the truck tax, and expanding property tax relief.
Ranking member Holly Cheeseman, R-East Lyme, said Connecticut’s overall tax burden shares the blame for driving up costs for families.
“If you look at the parts of the country that are gaining population, they are not typically the ones that have the tax policies of Connecticut,” Cheeseman said. “I do think that as we look at the policies that are going to make Connecticut friendly for families to live here, simply instituting child tax credit and EITC without addressing the other things that drive up costs is a devil’s argument.”