Last week, Republicans in the Connecticut state legislature proposed an alternative budget, which they claim will cut taxes while maintaining basic social service programs.
The budget was proposed as an alternative to Gov. Dannel Malloy’s plan, when the governor challenged assembly Republicans to create a budget free of debt obligations or political “gimmicks.” Key elements of the plan, which Republicans refer to as “the only honest budget out there,” includes eliminating sales tax on over the counter medicines and clothing items under fifty dollars as well as cutting the Earned Income Tax Credit program, which provides tax credit for low income working families.
The idea behind the budget is that the removals of certain sales taxes will offset the loss that low-income families suffer from the destruction of the EITC, according to State Senator Toni Boucher, a Republican from the 26th Assembly District. Boucher said the program costs $130 million each year, and that its removal would reduce costs for everybody.
When asked why the Republican platform prioritizes the decrease in sales tax over the EITC program, she said that the program has been recently implemented and is fiscally unstable
“[Low-income families] get all they need from other programs that are more substantial,” she said. “Programs that are for everyone, not just one group.”
Fred Carstensen, a professor of economics at the University of Connecticut, said that the net effect the Republican budget would have on Connecticut’s economy is only “moderately” different from the vision set forth by Assembly Democrats. In particular, Carstensen pointed to a $3 million increase in mental health spending as one of the most positive aspects of the Republican proposal.
But Carstensen added he believes the Republican call to eliminate the EITC was an irresponsible recommendation.
“The peculiarity of the elimination of the EITC is that it was initiated at a federal level by Ronald Reagan, who thought it was the greatest thing we’ve had to help low-income households because it forces people to work and takes them off other types of social safety nets,” Carstensen said. “It was a core Republican idea.”
Adam Joseph, a spokesman for the Senate Democrats, said he agrees that removing EITC would be more harmful than helpful. He said that there are over 1,000 families dependent on the EITC, who would not benefit equally from Republicans’ proposed savings in sales taxes.
However, Patt O’Neal, a spokesman for the House Republicans, questioned the integrity of the EITC program, calling it one of the “most fraudulent tax programs in the country.” He said the income tax returns proposed will directly benefit the working poor, because though they do also apply to higher income families, they will not benefit the wealthy as much.
“[The Republicans] are the only budget that won’t increase the deficit next year,” he said.
Carstensen said that, though it claims to be more fiscally responsible, the Republican proposal fails to address Connecticut’s long-term economic challenges. While the Republican budget would create about 1200 new jobs, he said, these would be cut by two thirds because of the elimination of the EITC.
The state’s bonded debt for capital projects totaled $17.7 billion at the close of the 2013 fiscal year, and the state’s liabilities came out to $46.5 billion.