ANNAPOLIS – The Senate approved and sent to the House Friday a bill that would help poor Marylanders by giving an income tax break to families living below the federal poverty line.
Supporters say the $18 million the state would spend on refundable earned income tax credits under the bill is worthwhile because it will help the working poor stay off welfare.
“The bill is designed to help poor people,” said Sen. Barbara Hoffman, D-Baltimore. “The little people should see some of the money.”
But critics said the refunds would amount to pittance per family and end up benefitting only hired tax preparers, who would be called on to complete the complex paperwork.
In its simplest form, the bill grants refunds “under certain circumstances” to low-income taxpayers, based on the difference between their state taxes and 10 percent of their federal earned income credit.
For example, a person making $13,000 would have an average earned income credit of $2,498 and would be entitled to get back 10 percent of that — about $250 — from the state. Since that person would typically owe the state $177 in taxes, they could actually pocket the difference, in this case about $73.
Several lawmakers said the bill has good intentions, but they are not sure it is practical. Many of those who would be eligible for the credit do not now file a Maryland tax return because they do not make enough money, said Sen. Vernon Boozer, R-Baltimore County.
“Requiring these individuals to file is an inefficient and costly way to direct resources to low income individuals,” he said.
He called it the “tax preparers’ bill of the year,” since many of those eligible for refunds would have to pay someone to complete the paperwork, eating into their already little refund.
Sen. Nathaniel McFadden, D-Baltimore, chafed at Boozer’s suggestion that people on welfare are not intelligent enough to fill out the forms for themselves.
“It’s not that people can’t think,” McFadden said. “They just happen to be broke at the moment.”
He conceded that the refunds are not much, but said every dollar counts when you are poor. McFadden, who reminded the Senate that he is a product of the welfare system, said $40 or $50 “is a lot of money when you live in the projects.”
But Boozer said paying a tax preparer is not so much the issue as the fact that “the people that we’re trying to help might not be helped at all.”
While the intent of the bill is help with welfare reform by keeping people on the job, Boozer said lawmakers are “coming in the back door with another public assistance program.”
The Senate approved the bill 46-0. A companion bill has been filed in the House but has not been acted on.