Low-income tax break benefitting out-of-staters
Massachusetts sends more than $5 million out of state every year to more than 20,000 people who live elsewhere but receive the state earned income tax credit, a North Shore representative said Tuesday.
And with the recent expansion of the tax credit, Massachusetts could soon be sending $7.67 million to residents of other states, Rep. Lori Ehrlich said.
"The earned income tax credit serves as both an effective anti-poverty program and a very helpful stimulus to the economy because the money that people receive from this credit goes right back into the economy," Ehrlich, a Marblehead Democrat told the Joint Committee on Revenue. "The only problem that is with this right now ... we are actually sending money out of the state when people file non-resident tax returns here in Massachusetts."
Ehrlich, a certified public accountant, testified Tuesday on a bill (H 3901) she filed to clarify eligibility for the tax credit, making non-residents ineligible and creating a formula so partial-year residents get the amount of the credit proportionate to the amount of time they were a Massachusetts resident.
Non-residents may get the tax credit now, Ehrlich said, because they earn income in Massachusetts, have financial interests in the state or file a tax return in Massachusetts for some other reason.
"My goal is to keep that money in the state for Massachusetts residents, keep it in the Massachusetts economy, and to have it help our economy instead of New Hampshire's economy or whatever state they're living in," she said.
The bill "seems like something everybody could embrace," she said, because it would save the state money and make more money available for other families who may qualify.
Last year, Gov. Charlie Baker signed a law expanding the state EITC from 15 to 23 percent of the federal credit. Baker and Senate President Stanley Rosenberg, a co-author of the original state EITC legislation in 1997, have both expressed a desire to further expand the EITC to 30 percent of the federal credit.
Ehrlich's bill, which was filed in May and was first heard by a committee Tuesday, has been co-sponsored by a bipartisan group of seven of her colleagues.
"This falls under the category of it's a no-brainer," Rep. Randy Hunt, a Sandwich Republican who is also a CPA, said. "For somebody who is a non-resident to be receiving money from the treasury here makes no sense."
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