Governor Proposes Increasing the Earned Income Tax Credit to 40%
Governor Ned Lamont held a news conference on January 30, 2023 in Hartford to announce that the fiscal years 2024 and 2025 biennial state budget proposal that he will present to the General Assembly in February will include a plan to increase Connecticut’s Earned Income Tax Credit (EITC) from the current rate of 30.5% of the federal credit to 40%.
Increasing the rate will provide an additional $44.6 million in state tax credits to approximately 211,675 qualifying low-income households, above the amount they are currently receiving under the program. Typically, families with children receive more than 95% of all EITC dollars.
This is just one of several tax relief measures Governor Lamont will include in his upcoming budget proposal. Earlier this month, he announced that it will include a plan to restore the pass-through entity tax credit to its original level, enabling small business owners to save money by claiming a larger credit on their returns. The governor plans to announce additional tax relief measures – including those targeted toward middle-class workers – in the coming days.
“Increasing this tax credit is one of the most impactful things we can do to target direct relief to low-income workers who are providing for their families, especially those with children,” Governor Lamont said. “Numerous studies have shown that the EITC is one of the best anti-poverty tools we can use because it encourages work, boosts economic stability, and uplifts generations to come. Ultimately, this tax credit helps improve entire communities because these dollars are being invested right back into our local economy through groceries, transportation, clothing, rent, utilities, and other necessary expenses. The EITC encourages work and boosts economic stability, and I think it’s about time that we increase it.”
Governor Lamont applauded the advocacy of Senate President Pro Tempore Martin M. Looney (D-New Haven), who championed the creation of Connecticut’s EITC in 2011 and whose support has ensured that it has remained a component of every state budget that has been enacted since its conception.
“Connecticut’s Earned Income Tax Credit helps approximately 211,000 Connecticut taxpayers and their families,” Senator Looney said. “The passage of this tax credit in 2011 was a testament to the importance of Democratic leadership after years of being stymied by Republican governors. We can say we want to help people out of poverty, but the EITC is one of the ways to actually accomplish that goal. The EITC is an important piece of a Democratic budget and I want to thank Governor Lamont for including it as a priority.”
The Connecticut EITC is a refundable state income tax credit for low income working individuals and families that mirrors the federal EITC. The federal income eligibility requirements for 2022 are:
No dependents: $16,480 for individuals and $22,610 for married filing jointly
One dependent: $43,492 for individuals and $49,622 for married filing jointly
Two dependents: $49,399 for individuals and $55,529 for married filing jointly
Three dependents: $53,057 for individuals and $59,187 for married filing jointly
The amount of each household’s credit is need-tested and depends on the size of its federal credit, which the IRS calculates based on taxpayers’ income, marital status, and number of qualifying children. For example, under the current rate of 30.5%, a married family with two qualifying children receives a state tax credit of up to $1,880. Under Governor Lamont’s proposal to increase the rate to 40%, that same family will receive a state tax credit of up to $2,465, providing them with an additional $585.
Increasing the rate to 40% will make Connecticut among the top five states in the nation with the largest EITC rates. Twenty-nine states and the District of Columbia offer their residents an EITC, and the average rate among them is 22%. Governor Lamont’s proposal to increase Connecticut’s rate will make it higher than each of its neighboring states, including Massachusetts (30%), New York (30%), and Rhode Island (15%).
The Connecticut EITC was created in 2011 and has had varying rates over the last decade, including:
2011: 30%
2012: 30%
2013: 25%
2014: 27.5%
2015: 27.5%
2016: 27.5%
2017: 23%
2018: 23%
2019: 23%
2020: 23%
2021: 30.5%
2022: 30.5%
Additionally, Governor Lamont and the General Assembly provided supplementary economic assistance to EITC-eligible households in 2020, 2021, and 2022 with one-time COVID-relief funding.
Governor Lamont is scheduled to deliver his annual budget address to the General Assembly on Wednesday, February 8, 2023, at noon. Documents containing the full details of his biennial state budget proposal will be released at that time.
