Earned income, child care tax credits advance
Tax credits for workers and families advanced to the Pennsylvania House floor this week, setting the stage for a partisan showdown over the ballooning cost of incentive programs moving through the chamber.
Lawmakers clashed over two bills – one to create an earned income tax and another to expand the state’s existing child care tax credit – in the House Finance Committee on Tuesday.
While Democrats lauded the proposals as a lifeline for residents struggling against rising costs, Republicans feared the price tag in the coming years. They say the combined efforts total $2 billion when the governor’s other credits for teachers, nurses, and police officers and cuts to certain cellphone fees are figured into the equation.
“This year yes, I agree, probably we can spend pretty much whatever we want,” said Rep. Jack Rader, R-Effort. “But these programs don’t go away in future years, and we have to cover these expenses.”
“And I’m looking down the line … and I’m concerned about what kind of hole this puts us in and how we would get out of the hole,” he added.
According to the IRS, 1 million residents claim the federal earned income tax credit each year, receiving an average amount of $1,874. House Bill 1272 would establish a state earned income tax credit worth 25% of the federal program.
Majority Chairman Steven Samuelson said it would amount to $450 per family and cost the state $233 million in its first year.
“I believe strongly this is something we should be doing to lift up the people who are doing everything right,” said prime bill sponsor Rep. Christina Sappy, D-Kennett Square. “They are working, they do not qualify for our social safety net programs and they are frequently one car repair away from a serious financial situation that could actually land them in a social safety net program or derail their progress in their career.”
The proposal advanced along a party-line vote, though many of the same concerns were echoed over a second bill to expand the state’s new child care tax credit program.
First created in July, the state child tax credit offers families in certain income brackets a tax credit worth 30% of the federal version of the program. Democratic lawmakers, via House Bill 1259, want to boost the amount to 50% of the total amount claimed over the next four years.
Supporters of the bill said exorbitant child care costs run the average family $15,000 per child, forcing them to abandon careers and reduce income tax collections. They argue the expansion encourages families to stay in Pennsylvania, and in combination with other tax credit programs proposed, will help grow the state’s working-age population and, by extension, increase revenues to help cover ongoing costs.
Critics said certain provisions mean families earning $307,000 annually would qualify for the credit – undermining the program’s intent to support lower- and middle-income earners.
“This is like paying for your groceries with your savings account and paying for all of your household items with your savings account,” said Rep. Joseph Adams, R-Hawley. “Then, when the savings account is gone four or five years from now, how do you sustain your household?”