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Politics & Government

Bill seeks to change Earned Income Tax Credit in First State

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Delaware Public Media
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State lawmakers are considering legislation that would adjust the way the Delaware approaches the Earned Income Tax Credit.

Currently, the state offers low wage earners a 20 percent match of the federal EITC they receive.  But that match is not refundable – meaning if your credit exceeds the amount you owe the state, you don’t take home the difference. 

"Those at the lower end of the scale that are eligible for the federal program get nothing from the state. Two-third of the roughly 80,000 individuals who benefit from the federal program in Delaware get nothing from the state because of the non-refundability," said State Rep. Paul Baumbach (D-Newark), who is sponsoring a bill to change that.

The Newark Democrat says making the credit refundable will put more money in the hands of the state’s working poor – a group he argues has seen little relief from state government since the 2008 financial crisis.

“Just look at last year when general assistance was cut (in the state budget). We have been pulling back on them for years now.  It is overdue to be attending to this, " said Baumbach. "I’ve talked to Republican colleagues who agree that this is a very good and overdue step to help the working poor in our state.”

Of the 26 states that have a state EITC, Delaware is one of only three that does not make it refundable. 

Baumbach says to help absorb the cost of the change the match will drop to 6 percent next year then grow by one percent each year until it caps at 15 percent in 2026.

The state’s budget office estimates the change will have no impact on the 2017 budget, but will cost a combined $3.3 million over the next two years.

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