A legislative committee recommended passage of a bill to expand the state’s child tax credit program to assist low-income families in what advocates argue would be a crucial step toward reducing poverty in Maine.
The Taxation Committee voted in favor of the child tax credit bill 7-1 on Thursday, with Sen. Jim Libby (R-Cumberland) joining Democrats in support of the legislation. Five committee members were absent and have 48 hours after Thursday’s session to vote. But the large margin of support in the initial vote means the bill is assured of receiving the backing of a majority of the committee. The measure will face further votes in the House and Senate.
As Beacon previously reported, the child tax credit bill — LD 1544, sponsored by House Majority Leader Mo Terry (D-Gorham) — would replace the state’s existing dependent tax credit with a new program and increase the credit amount to $350 per dependent from $300.
Crucially, Terry’s bill would also fix a major flaw in the existing initiative by making the program fully refundable, meaning that those with extremely low incomes could access the child tax credit. That would make the program available to about 73,000 Maine children whose families make too little to qualify for the current credit. Terry’s bill would also peg the credit amount to inflation each year, meaning the funds are likely to increase over time.
If passed, the bill could reduce childhood poverty by over 12%, lifting 3,500 low-income kids out of severe economic hardship, experts estimate.
In its Thursday vote, the committee passed an amended version of LD 1544. That version essentially takes language from Gov. Janet Mills’ budgetary change package proposal that makes technical changes to the state’s existing dependent tax credit program and adjusts it to include Terry’s goal of making the credit $350 and fully refundable.
The expansion of the federal child tax credit program in 2021 demonstrated the power of the CTC-type policies. The larger federal CTC program was a major contributor to a 46% decline in child poverty from 2020 to the next year, with that rate dropping to a record low 5.2% in 2021. However, amid opposition from conservative Democratic Sen. Joe Manchin of West Virginia and many Republicans, Congress allowed the federal program to expire at the start of 2022.
Advocates argue Maine should take a lesson from the success of the federal program by expanding the state’s version of the CTC.
“I believe it’s time for Maine to stand up and make known what we value,” Terry said earlier this month. “We believe in supporting families, we believe in supporting our children, and we believe in setting up kids for success early.”
The child tax credit bill wasn’t the only significant measure the Taxation Committee voted on Thursday. The panel also considered LD 1338, sponsored by Rep. Ben Collings (D-Portland), which would amend Maine’s estate tax law. However, the outcome of that vote is unclear because a number of members of the committee were not present.
As Beacon previously reported, former Gov. Paul LePage, along with Republican lawmakers, started in 2012 raising the threshold for the application of the estate tax, which deals with inherited wealth, from $1 million to $5.6 million for individuals or $11.2 million for joint estates of married couples. That meant anyone with wealth below that threshold was not subject to the estate tax, giving some still very rich people a major tax cut. Economists say those cuts have increased inequality, which spiked during the pandemic.
Collings’ bill would lower the threshold for the estate tax so that it applies to estates worth $2 million and above in order to help fund the state’s urgent need for housing. Conservatives and anti-tax advocates often portray the estate tax as an attack on small family farms that are passed down through the generations. Collings’ proposal would exclude inherited property used for heritage industries like farming, fishing and logging valued at less than $3.8 million.
Before Thursday’s vote, though, Taxation Committee Senate Chair Nicole Grohoski (D-Hancock) put forward an amendment that would put the threshold for the application of the estate tax at $3 million — a lower threshold than the current law but not as low as Collings’ original proposal of $2 million. She also proposed an amendment to exclude properties valued at up to $4 million that are used in industries such as farming, fishing and logging from the estate tax rather than Collings’ original proposal of properties valued at $3.8 million.
The committee on Thursday voted 4-3 in favor of the measure as amended, with Grohoski, Sen. Ben Chipman (D-Cumberland), Rep. Ambureen Rana (D-Bangor) and Rep. Tavis Hasenfus (D-Readfield) supporting the measure.
Libby, Rep. Shelley Rudnicki (R-Fairfield), and House Committee Chair Joe Perry, a Democrat from Bangor, opposed the bill.
Four Republicans and two Democrats did not vote during Thursday’s committee hearing, making it unclear whether the measure will ultimately receive majority support from the panel.