Lawmakers consider ways to pay for income tax credit expansion

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BOSTON >> To hear Megan Sandel tell it, an income tax credit for low-income families is akin to a prescription that can reduce the risk of pre-term births and low birthweight babies.

Testifying before the Legislature's Joint Committee on Revenue, Sandel pointed to studies that the earned income tax credit helped reduce low birth weight by 7 percent overall and by 8.2 percent among African Americans. A Federal Reserve Bank of Chicago study said recipients of the tax credit buy healthier food, according to Sandel.

Sandel, an associate professor of pediatrics and public health at Boston University's School of Medicine, said increasing the tax credit would "improve the health of my patients" by helping families buy food, pay rent and keep the heat and lights on.

"In this case, if you saw that it was going to have this type of an effect on low birthweight rates, pre-term birth, children's health, then I think it's a great investment of money," she said.

Gov. Charlie Baker proposed a state earned income tax credit increase to 30 percent of the federal credit, effectively doubling it, and tied it to the elimination of the film tax credit as the way for the state to pay for the expansion. He filed the proposal (H 62) separately from his budget plan, and the Revenue Committee held a hearing on it on March 31.

Rep. Jay Kaufman, House chair of the Joint Committee on Revenue, said Tuesday the earned income tax credit has "universal" support.

"The only question is how much and how to pay for it," he said.

Asked his ideas on paying for it, Kaufman, D-Lexington, said, "Lots of ideas, no recommendation at this point."

Sandel and others backed legislation (S 1477) on Tuesday increasing the tax credit to 50 percent, saying it would provide a maximum benefit of $3,121. The bill was filed by Sen. Jamie Eldridge (D-Acton).

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As a way to pay for the increase, Sandel said she supports Sen. Benjamin Downing's proposal (S 1475), which freezes the state income tax rollback, keeping it at 5.15 percent instead of allowing it to gradually decrease to a voter-approved level of 5 percent when annual economic triggers are satisfied.

Downing indicated last week he is considering filing the bill as an amendment when the Senate takes up its version of the fiscal 2016 budget later this month.

The House's budget proposal, passed in April, does not touch on Baker's proposal to increase the earned income tax credit and phase out the tax credit for film productions.

"The rules of engagement for us were that if there's a bill before the committee, the committee process will be allowed to run its course," Kaufman said.

Sen. Michael Rodrigues, D-Westport, co-chair of the Revenue Committee, said the governor's plan provides a "concrete method" to pay for the tax credit increase.

"We haven't developed that method yet in the Senate, but I think -- and I won't speak for my House colleague -- I'm certainly committed to increasing the earned income tax credit and finding a way to pay for it," he said.

The Revenue Committee also took testimony on a bill (H 2598) that would restore the state income tax rate to 5 percent by July 1, 2015.

"It's about time we got down to 5 percent," said Chip Faulkner, associate director at the Citizens for Limited Taxation, pointing to a 2000 ballot question passed by voters that called for the rollback. In 2002, lawmakers froze the reduction and set up triggers to allow for a more gradual reduction.

The Massachusetts Teachers Association submitted written testimony opposing the bill, filed by Rep. Marc Lombardo, R-Billerica, to reduce the income tax. The union also said it opposed bills lowering the sales tax to 5 percent and establishing a one-year waiting period for new taxes (H 2641).

"Until such a time as there is adequate revenue to fund the programs necessary for our collective well-being as witnessed in an educated workforce able to fully participate in this economy, proposals which do not enhance the public good and negatively impact the available revenue stream should be avoided," wrote Catherine Fichtner, a lobbyist for the union.


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