Delaware Vote Tracker

Refundable Earned Income Tax Credit Passes House

The House passed Representative Paul Baumbach’s bill that would make the state’s Earned Income Tax Credit refundable, giving some much needed financial relief to low and middle income Delawareans.

House Bill 16 passed unanimously, 40-0-1. Representative Sean Matthews was absent.

House Bill 16 SponsorsYes VotesNo Votes
Baumbach, Yearick, Briggs King, Cooke, Griffith, Longhurst, Morrison, Osienski, Ramone, M.Smith, K.Williams, Wilson-AntonHouse Passed 40-0-1. Baumbach Bennett Bentz Bolden Brady Briggs King Bush Carson Chukwuocha Collins Cooke D.Short Dorsey Walker Dukes Gray Griffith Heffernan Hensley K.Johnson K.Williams Kowalko Lambert Longhurst Lynn M.Smith Minor-Brown Mitchell Morris Morrison Osienski Postles Ramone S.Moore Schwartzkopf Shupe Smyk Spiegelman Vanderwende Wilson-Anton YearickMatthews (Absent)
Sokola, Pettyjohn, Ennis, Hansen, Lopez, S.McBride, Pinkney, Townsend, Walsh
Current Status: Senate Finance 3/25/21

The federal Earned Income Tax Credit (EITC) is a tax credit that reduces the amount of federal income tax a person owes, and is refundable if the tax-filer’s credit is larger than what they owe in taxes. EITC is described as the nation’s most effective anti-poverty program for working families. The federal EITC was introduced in 1975 and was designed to offset federal income taxes and social security payroll taxes while rewarding work.

About 30 states, Delaware included, have state Earned Income Tax Credits. In Delaware, the state EITC is non-refundable, reducing the state tax liability but not providing a refund to residents. Non-refundable EITC might offer tax relief to families who owe state taxes, but it does not offer any benefit to working families that have income too low to owe state income taxes. Making the EITC refundable would provide a direct financial benefit to thousands of Delaware families.

House Bill 16 would modify Delaware’s EITC program to allow recipients to choose the most beneficial credit to be applied against their state personal income taxes. Recipients could choose between a non-refundable credit of up to 20% of the value of the corresponding federal EITC, or a refundable EITC credit of up to 4.5% of the value of the corresponding federal EITC.

According to state officials, a refundable Delaware EITC would provide an increased benefit to 26,000 Delaware working families, averaging $121 each. Another 16,000 Delaware working families who don’t meet income thresholds for personal income tax would become eligible for the Delaware EITC. Even those whose incomes do not meet the threshold for owing Delaware personal income tax contribute to regular payroll taxes, as well as various consumption taxes, such as the gas tax.

According to the Kids Count Delaware report, 72,000 Delawareans filed federal EITC claims in 2020, averaging a return of $2,408 per person. The Center on Budget and Policy Priorities estimates that in 2018, the federal EITC lifted about 5.6 million people out of poverty, including about 3 million children. The credit reduced the severity of poverty for another 16.5 million people, including 6.1 million children.

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“For low-income working families, just an additional $100 a year could mean the difference between going hungry and keeping food on the table, or the ability to purchase school supplies for their children,” said Rep. Baumbach, D-Newark North.

“The Earned Income Tax Credit provides hard-working families an exit ramp off the poverty highway by enabling them to use these additional funds for the necessities of life. Making Delaware’s Earned Income Tax Credit available to all working families who qualify for the federal program will have an enormously positive effect on low-income Delawareans. I’m grateful for the strong bipartisan support and backing of Governor Carney that this bill has received, and I look forward to its passage into law.”

“The federal Earned Income Tax Credit has been an invaluable tool that lifts families out of poverty, rewards work and improves health outcomes by simply putting more money in the pockets of the people who need it most,” said Senate President Pro Tempore Dave Sokola, the prime Senate sponsor of HB 16. “This legislation will build on that success by giving Delaware families options when it comes to how our EITC can best fit their needs.”

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