The Maryland House of Delegates tacked on additional revisions to Gov. Lawrence J. Hogan Jr.’s (R) billion-dollar COVID-19 relief proposal, including a large expansion to the Earned Income Tax Credit.
Under the House proposal, the Earned Income Tax Credit (EITC) would see the largest single increase in Maryland history, House Majority Leader Eric G. Luedkte (D-Montgomery) said. The proposal would increase the state’s match to the federal EITC for taxpayers with dependents from 28% to 45% for three years, making Maryland the largest EITC refunder in the country.
Hogan’s original stimulus called for direct, immediate payments to Marylanders using the EITC. The first round of payments will remain the same under the House proposal, with $500 payments going to families and $300 to individuals who filed for the EITC in 2019.
The House plan nixes Hogan’s proposal for an additional $250 to families and $150 to individuals who filed for the EITC in 2020. Instead, it would drastically increase the refundable credit that EITC filers get in the state over the next three years. Luedkte said that, if the House amendments are approved, a family with two or more kids that earns $25,000 a year would see an annual credit increase of roughly $1,100.
“Put it another way. Under the RELIEF Act’s original proposal, that family would have gotten a one time payment of $500 and another one time payment of $250,” Luedtke wrote on Twitter. “Under our version, they get $500 immediately, another $1100 once they file their taxes, and then the same in 2022 and 2023.”’
The House Ways and Means Committee and Economic Matters Committee both approved the proposals Wednesday, sending the fast-tracked legislation to a floor vote.
Luedtke said the vast EITC expansion will mean more money for low-income individuals and families. He said the tax credit is the “single-strongest anti poverty program” the government has to offer.
Individuals will also see a bump in their EITC, Luedtke told Ways and Means Committee members during a Wednesday meeting. He said the state’s match for EITC filers without dependents would increase to 100%, and would essentially double the benefits for individuals by increasing the state’s EITC match.
Luedtke told Maryland Matters that he’s pushing for a statewide effort to get more low-income Marylanders to file for the traditionally underutilized EITC.
The House proposal would also allow employers to hold off on paying unemployment insurance taxes until Jan. 31, 2022. Luedtke said the state would use a low-interest loan from the federal government to supplement that lost revenue, with the hope that federal officials would eventually forgive that debt.
He compared the deferment to a yearlong, interest-free loan that would allow businesses to get back on their feet as the economy recovers from the COVID-19 pandemic.
The House plan also keeps a provision in Hogan’s proposal that would exempt hard-hit businesses from a drastic increase in their unemployment taxes as a result of COVID-related layoffs.
Other House amendments make changes to the slew of tax cuts on unemployment benefits originally proposed by Hogan. Whereas Hogan’s proposal put a complete stop to taxes on unemployment benefits for individuals, the House proposal seeks to put a cap on who is exempt.
Some of Hogan’s proposals, like eliminating taxes for pandemic-related grants and forgiven loans, have remained untouched through both the House and Senate, Luedkte said at a House Economic Matters Committee meeting Wednesday.
And, as a result of what Luedtke described as a “compromise” between the House, Senate and Hogan, the proposal cuts back on the Senate’s proposed $520 million in additional spending. Instead, the House proposal offers up $296 million in what Luedtke said would largely consist of direct relief for Marylanders, like help paying utility bills.
He said that aid will go toward many of the programs the Senate hoped to fund, but added that a supplemental budget amendment will handle the specifics of how that additional funding is spent.
Amendments that passed the Senate included targeted relief money for education, small businesses, and money for thousands of Marylanders stuck in adjudication for unemployment benefits.
Ways and Means Chairwoman Anne R. Kaiser (D-Montgomery) said the spending will largely go toward programs “that can get money in people’s hands immediately,” rather than requiring a lengthy application process for relief.
Some, including Comptroller Peter V.R. Franchot (D), have charged that the state could do even more to get immediate relief for families. Franchot has repeatedly called for much larger stimulus payments to low-income Marylanders — and has warned that current proposals leave out tax filers without Social Security numbers.
“What’s more, tax-paying immigrants without Social Security numbers — filers using Individual Taxpayer Identification Numbers (ITIN) — would not receive stimulus payments under Gov. Hogan’s proposal since ITIN filers are not eligible for EITC due to discriminatory federal rules,” Franchot previously wrote. “Last year, more than 86,000 ITIN filers filed state tax returns, paying more than $100 million in state and local taxes. Not even one of our hard-working neighbors would receive a penny under the governor’s proposal.”
Franchot and Montgomery County Council President Tom Hucker (D) spearheaded a coalition earlier this year to demand that Hogan use more of the state’s rainy day fund as emergency relief for Marylanders.
Luedtke emphasized that this billion-dollar relief package is only the first step in getting relief to Marylanders and small businesses that have been hard-hit by the pandemic. Several delegates, including Del. Jessica M. Feldmark (D-Howard) have said they want to provide relief to Marylanders who aren’t covered under current state and federal relief programs — like those who aren’t U.S. citizens.
The Legislative Hispanic Caucus gathered virtually late Wednesday to discuss their displeasure over the bill not containing relief funding for non-documented Marylanders. Luedtke was present, defending the proposal.
Luedtke described the bill as a “compromise” for immediate relief, and said the federal government has prevented ITIN filers from receiving relief through much of the pandemic. He proposed the legislature set up a program to eventually help those taxpayers. He told Maryland Matters that he expects additional legislation aimed at helping those excluded from the EITC soon.
“We should make sure that these people get access to stimulus,” Luedtke said, though he doesn’t think that relief will come from the amended RELIEF Act.
He said legislators are on a tight deadline to push out the relief legislation, not only because Hogan has repeatedly called on the legislature to quickly approve the bill, but also since it affects people filing their 2020 taxes.
“We have to get this bill done before the comptroller starts processing those returns,” Luedtke said.