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HARRISBURG — Pennsylvania households of all income levels could receive more than $2.5 billion in tax cuts by 2028 under two bills that passed the state House last week.
The proposal passed with bipartisan support, but it may not survive the Republican-dominated state Senate, where new Democratic Gov. They are about to negotiate a plan, destined to signal rising political tensions. .
Pennsylvania’s coffers are full. The state has about $12 billion in cash reserves amassed during the COVID-19 pandemic, mostly from income taxes. Increase in corporate profits and Increased federal spending It increased the national budget and increased individual tax payments.
However, the state’s Independent Finance Office, which analyzes Pennsylvania’s finances, Predict The revenue shortfall over the next five years will be about the same as the state’s current windfall income.
Legislators are constantly battling whether to spend or save. But the Democrats now control the Legislative Yuan and have their own priorities on the agenda, a departure from the budget skirmishes of former Democratic Governor Tom Wolfe.
“My point is, how do we defend keeping so much tax money in Harrisburg and not investing that we know we should be doing?” of the House Appropriations Committee. Commissioner Jordan Harris (D-Philadelphia) told Spotlight Pennsylvania.
With this principle in mind, earlier this month the State House Democrats Moved the budget forward based on Shapiro’s suggestion That includes additional hundreds of millions of dollars for education and housing, and is currently driving the creation or expansion of two state tax programs piggybacked on federal policy.
one bill Will expand the state tax credit created last year Allow parents to deduct childcare costs from state taxable income. Current credit is limited to 30% of childcare costs. The proposal would increase that to 50% (or up to $5,000 for one child or $10,000 for multiple children, whichever is lower) by 2028.
Childcare fees vary depending on the region and age of the child. according to For Pennsylvania families, the amount can range from $6,000 to $14,000 a year, according to Federal Labor Department data.
“Parenting is workforce development,” says Harris. “You can’t go to work if your parents aren’t taking care of you in a responsible and responsible way. And when people can’t go to work, the economy shuts down.”
Another proposal would create a state version of the Earned Income Tax Credit, a federal program that provides tax breaks for individuals and families. Below a certain income level.
Eligibility for federal credit depends on your income, marital status, and number of dependents. Income is capped at her $17,000 if she is a single taxpayer with no children, and her $63,000 if she has three or more dependents. The taxpayer benefit will be $600 for a childless individual and $7,400 for him if the child is in her family of three or more.
Pennsylvania National credit proposed by Democrats Current recipients will be able to claim a 25% federal deduction from their state taxes.
Mark Stier, a policy analyst at the left-leaning Pennsylvania Policy Center, said the maximum deduction under the federal earned income tax credit increases with income.
“There’s a huge incentive to work, and that’s why it was originally a Republican idea.” Back to Richard Nixon‘” Steer told Spotlight PA.
2020 Pennsylvania Budget and Policy Center study Steer’s co-author found that nearly 900,000 Pennsylvania taxpayers would benefit from such a policy.
The state-level earned income tax credit will cost $1.4 billion over the next five years, and expanding the childcare tax credit will cost $1.1 billion, according to a fiscal analysis prepared for Congress by the Pennsylvania Department of Revenue.
In a public statement, Mr. Shapiro welcomed the contributions of state House Democrats to the budget talks and expressed support for similar priorities in his own budget, albeit on a smaller scale.
For example, Shapiro suggested investing $66.7 million in existing state programs, rather than a $1 billion tax cut. help with childcare For low income households.
He also proposed targeted tax credits to attract people. Licensed Nurse, Teacher, Police Officer There is an annual non-refundable tax credit of $2,500 through 2028, with a maximum of $7,500.state legislature passed it Shapiro’s plan for Tuesday is 137-66.
The State Department of Revenue estimates that the loan will cost a total of $222 million over five years.
After a press conference last week, Mr. Shapiro said he would not “negotiate the details of the budget publicly here,” and declined to answer specific questions about the earned income tax credit.
Instead, he said he would speak to all four caucuses, “but especially Senate Republicans. [and] On the priorities of House Democrats’ giving orders to the House majority.
“And I am confident that in the end we will be able to come up with something that reflects our shared priorities,” he concluded.
Both Democrat-sponsored tax plans passed the state House last week with bipartisan support, but the price tag and questions about who would benefit from the credit raised concerns among some Republicans.
Rep. Seth Grove (York, Republican), the state’s chief budget negotiator, argued during the floor debate that the expanded childcare tax credit would primarily benefit middle-class and upper-middle-class households. bottom.
IRS data on Pennsylvania’s 2020 tax returns shows that just under 50% of the approximately 190,000 tax credit applicants earn more than $100,000 a year and receive $50 million in tax relief.
Grove also argued that the earned income tax credit would be an “expensive benefit program” riddled with mistakes and overpayments. according to About 1 in 4 EITC payments are made in error, according to the IRS, but policy analysts debate whether this is reflected scam again report a mistake.
The childcare bill and the EITC tax credit bill are now on the way to the state Senate, where the House Democrats’ budget bill is also on the table.
Senate Majority Leader Joe Pittman (R., Indiana) told reporters last week that the Democratic spending proposal is an “impossible number” given the state’s fiscal future. He also downplayed the possibility of a tax cut, saying he wasn’t sure “whether our budget can accommodate such a tax cut.”
However, he expressed some support for issues targeted by the Democratic Party, such as childcare and school construction.
“In my opinion, we need to be honest with taxpayers. We might be better off spending our money this year,” Pittman told reporters. “But I’m not interested in having to explain to taxpayers why, four years from now, we should all of a sudden be ripping off their money.”
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https://www.spotlightpa.org/news/2023/06/pa-child-care-earned-income-tax-credit-legislature-budget-shapiro/ PA Focuses on Parenting and Income Tax Credit Spotlight PA