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Taxation Committee Considers Low-Income Tax Credits

By   /   March 31, 2011  /   News  /   No Comments

Members of the Taxation Committee this afternoon held public hearings on bills that would increase tax credits for low-income Mainers.

Two bills, LD 695 and LD 707, propose to raise the percentage of the federal earned income tax credit (EITC) than may be deducted for state income tax purposes.

Under current state law, qualifying residents may deduct 5 percent of the value of the federal EITC from state tax liabilities. A federal tax credit totaling $3,000, for instance, would yield a state credit of $150.

LD 695 would increase the percentage to 10 percent, whereas LD 707 would increase the percentage to 25 percent of the federal EITC.

Both bills include provisions to make the state credit refundable, meaning that if the tax credit reduces the payee’s liability below zero, the state would refund the difference.

Twenty-four other states including the District of Columbia have established state-level EITCs to supplement the federal credit. Programs in 21 states and the federal program are refundable. Maine and two other participating states do not currently offer refundable credits.

Rep. Elspeth Flemings (D-Bar Harbor), the sponsor of LD 695, hailed the EITC as an “excellent, targeted tool” that “helps people enter the workforce, reduces poverty, and grows the economy.”

Flemings said that an enhanced state credit would have a stimulative effect. “Putting money into the hands of low- and moderate-income people most likely to spend that money into the local economy would grow our economy and support Maine businesses.”

Jessica Carr, an Augusta resident and mother of two, said that the EITC has sustained her family through financial turmoil.

Even though Carr works part-time on top of her full-time job, she still relies on the EITC to catch up on bills. “The EITC would help me build a better future for my children,” she said.

According to the Office of Fiscal and Program Review, Flemings bill would result in $14 million reduced revenues to the General Fund each fiscal year. LD 707, the bill introduced by Peter Stuckey (D-Portland), would likely cost nearly $40 million.

Mark Muddy, who testified on behalf of the Roman Catholic Bishop of Portland, said that expanded the state’s EITC is the single greatest measure the committee could pursue.

“Our support,” he said, “is rooted in a fundamental belief in the communal responsibility we all share to assist those that are most in need. We believe that the state has a moral obligation to provide what we call a ‘preferential option’ for the poor and the struggling low-income worker.”

Representatives from the Maine Association of Independent Neighborhoods, the Maine People’s Alliance, the Maine Equal Justice Partners, United Way of Greater Portland, the Maine’s Children Alliance, the state chapter of the AFL-CIO, and Preble Street Resource Center all spoke in favor of the two bills.

Work sessions on the bills have been scheduled at 1 p.m. on April 7 in room 127 of the State House.

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Stephan formerly served as staff reporter for Watchdog.org.