Mar 12, 2008 5:49 pm US/Mountain
State Lawmakers Debate Earned Income Tax Credit
Written for the Web by Libby Smith, CBS4 special projects producer
DENVER (CBS4) ―
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Anna Rice (right) and her family would likely benefit from a state earned income tax credit. Rice is a single mother of six.
CBS
On Thursday several state lawmakers were set to introduce a bill that would re-instate the earned income tax credit for the next several years. House Bill 1173 would restore funding for a refundable tax credit for Colorado's low income working families.
"The EITC is for working families and particularly if they have children," said Rep. John Kefalas, District 52, co-sponsor of the bill.
Legislation in 1999 instituted the state earned income tax credit as part of the Taxpayers' Bill of Rights (TABOR) Amendment, but 2001 was the last time the tax credit was enacted.
"Because of the recession and Referendum C, we've not been able to have the credit," Kefalas added.
This new proposal would re-instate the tax credit for the next two years. It would follow the guidelines of the Federal Earned Income Tax Credit.
Only families making less than $40,000 a year would be eligible. The credit would be 10 percent of the families federal return with the average state refunds falling between $160 and $200. A total of 259,000 Colorado taxpayers would benefit from the tax credit and it would cost the state $52 million in 2008.
"We have identified revenue sources that will not affect the state budget," Kefalas told CBS4.
The bill proposes using Federal TANF block grant money and some funds from the unemployment insurance account to pay for the state EITC over the next 2 years. After 2010, the tax credit would be funded by an offset of state revenue.
Supporters say EITC is the most effective way to fight poverty and that it will add directly to the state economy.
"It rewards work and I see it and many others see it as an economic development tool, too," Kefalas said.
Sponsors of the bill say the families who receive this money will spend it almost immediately on expenses they haven't been able to afford. That could include buying shoes and clothes for their children, or household or car repairs.
They cite the Federal EITC as helping low income families make up for job and income losses during the recession in the early 2000s.
Additional Resources - You can find out more about the proposed earned income tax credit by looking at an online summary or calling the office of Rep. John Kefalas at (303) 866-4569.
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