May 2017

Connecticut’s Earned Income Tax Credit (EITC): In a Low-Wage Economy, the EITC is More Important than Ever

Derek Thomas, M.P.A and Ray Noonan

Every job should allow parents to provide food, shelter, and financial security for their children. Connecticut’s Earned Income Tax Credit (EITC) is among the state’s most sensible and effective tools for helping working families struggling to get by on low wages. The refundable tax credit — currently set at 27.5 percent of federal EITC — boosts working families’ paychecks by offsetting their payroll taxes. This proven anti-poverty tool is now at risk, however, as all four budget proposals under consideration at the Statehouse include reductions to the tax credit.

  • In 2015, nearly 200,000 low- and moderate-income households received a tax credit from the state EITC.
  • The Connecticut EITC boosted about 6,600 people over the poverty line and eased poverty for another 99,000.
  • The EITC encourages and rewards working families, promotes positive children's outcomes and partially corrects Connecticut's upside-down tax structure, where low-income households pay a higher proportion of their income in taxes. 
  • Reducing the EITC in 2013 resulted in a $17 million tax increase for the state’s poorest workers. The newest round of proposed cuts would cost working families $25 million per year,  imposing a tax hike on nearly 200,000 Connecticut families who are working hard but not making enough to get by.

You can find town-by-town data on the EITC in our Tableau Page

Issue Area:
Budget and Tax