Senators seek bigger tax break for low-wage workers
BOSTON – Senate Democrats are leading a charge to again widen a tax credit meant to help low-income workers, less a year after the program was expanded.
In August, Gov. Charlie Baker signed a bill increasing the earned income tax credit from 15 to 23 percent of what low-wage workers claimed in earned income credits on their federal returns.
That boosted the maximum credit on state tax returns from $951 to $1,459. per individual.
Some Democrats say that wasn’t enough. They want to raise the tax credit to 30 percent of what’s claimed on a federal return – another $414 per filer.
“We want to help struggling low-income families,” said Sen. Barbara L’Italien, D-Andover, a co-sponsor of an amendment filed to the fiscal 2017 budget to raise the tax credit. “The governor, House and Senate agreed this was worthwhile last time. We just feel it merits an incremental increase.”
The plan is being debated this week with about 1,200 other additions to the $40 billion spending package.
There is broad support on Beacon Hill for expanding the tax credit — which now puts $125 million a year back into the pockets of low-wage workers — but lawmakers have divided over how to cover the lost revenue.
Last year Baker proposed increasing the tax credit to 30 percent of the federal credit, and paying for it by eliminating a film tax credit. Lawmakers rejected that plan amid a backlash from film production workers.
A separate proposal, which also failed, called for boosting the tax credit by freezing a scheduled drop in the state income tax rate.
The compromise signed by Baker in August paid for a more modest increase in the program by delaying a new corporate tax deduction.
Expanding the credit from 15 to 23 percent cost the state $72.5 million per year. It’s not clear how much it would cost to expand it another 7 percent, or how the state would pay for it.
“There’s no doubt a price tag attached,” L’Italien said. “It will be up the Senate to decide if this should be a priority.”
Statewide more than 415,000 filers earning less than $52,427 a year claim the earned income tax credit.
Increasing the credit will go a long way in cities such as Lawrence and Salem, where large numbers of filers claim it.
The 14,890 Lawrence residents who claimed the credit for 2013 represent the largest portion of tax filers – 42 percent – of any community, according to the nonprofit Massachusetts Budget and Policy Center.
In Haverhill, 4,834 filers took the credit that year. So did 3,646 in Methuen; 3,156 in Salem; 2,675 in Peabody; 1,751 in Gloucester; 1,668 in Beverly; and 510 in Newburyport, according to the center.
If the Senate moves to widen the credit, the plan would have to survive budget negotiations with the House before going to Baker for his signature.
The state Constitution says all “money bills” must originate in the House, and Speaker Robert DeLeo in the past has disputed the Senate’s right to attach tax measures to the annual budget.
Christian M. Wade covers the Massachusetts Statehouse for CNHI’s newspapers and websites. Reach him at cwade@cnhi.com