The Earned Income Tax Credit (EITC) is the nation’s most effective anti-poverty program for working families. The federal EITC offsets federal income taxes, social security payroll taxes, and supplemental earnings if you are within a certain eligible income range. Delaware, along with 24 other states, have their own state EITCs. However, Delaware’s EITC is non-refundable, which means it only reduces the tax liability but does not provide a refund to residents. Non-refundable EITC do not offer any benefit to working families that have income too low to owe income taxes.
Rep. Paul Baumbach’s House Bill 113, which has surprisingly received significant bipartisan support, would reform the EITC from nonrefundable to refundable and capable of exceeding the tax amount otherwise due. The credit would be phased in, increasing 1 percent per year from 6 percent of the corresponding federal earned income credit in 2018 until it reaches 15 percent of the federal EITC in 2027.
“Earned Income Tax Credit is probably one of the best public policy programs that can really lift people out of poverty,” said Rep. Baumbach. “EITC cuts taxes for low-income families, provides incentives to work, helps stabilize income and puts families on firmer ground. Making Delaware’s Earned Income Tax Credit available to all families who qualify for the federal program will have an immensely positive effect on Delaware families, and I look forward to pushing this effort forward.”
According to the 2015 Kids Count Delaware report, 73,000 Delawareans filed federal EITC claims in 2014, averaging a return of $2,222 per person. The Center on Budget and Policy Priorities estimates that in 2013, the federal EITC lifted about 6.2 million people out of poverty, including about 3.2 million children. The credit reduced the severity of poverty for another 21.6 million people, including 7.8 million children.
AN ACT TO AMEND TITLE 30 OF THE DELAWARE CODE RELATING TO EARNED INCOME TAX CREDIT.
UPDATED: 6/8/17
SPONSORS: Baumbach, Lavelle, Sokola, Yearick, Delcollo, Lopez, Pettyjohn, Townsend, Bentz, Briggs King, Dukes, Gray, Heffernan, Keeley, Lynn, Mitchell, Mulrooney, Osienski, Paradee, Potter, D.Short, Spiegelman
YES VOTES: HOUSE: B.Short, Baumbach, Bentz, Bolden, Brady, Briggs King, Carson, D.Short, Dukes, Gray, Heffernan, Hensley, Hudson, J.Johnson, Kenton, Longhurst, Lynn, M.Smith, Miro, Mitchell, Mulrooney, Osienski, Outten, Paradee, Postles, Potter, Q.Johnson, Schwartzkopf, Smyk, Spiegelman, Viola, Wilson, Yearick. SENATE:
NO VOTES: HOUSE: Bennett, Collins, Jaques, K.Williams, Kowalko, Matthews (Keeley was absent). SENATE:
HISTORY: Passed House 34-6-1. Onto the Senate.
STATUS: Waiting in the Senate Finance Committee.
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