The EITC in CT

For Tax Day I had a story over at the Yankee Institute about the Earned Income Tax Credit:

The EITC supplements the wages of low-income workers by sending them a check after they file their tax returns — even when they have no income-tax liability. The underlying idea is to refund the payroll taxes of low earners.

Who qualifies and how much they receive is based on what they earn and how many children they have. In Connecticut, for example, a married couple with two children making less than $51,492 would qualify. That family would receive at most $5,716 from the feds plus another $1,315 from the state. This would boost their total income to about $58,520, which is more than 227 percent of the federal poverty level.

Three different bills introduced in the Assembly sought to either expand the state EITC, kill it, or modify it, but all of them died in committee. I’ve become something of an evangelical for the EITC since learning about it last year, and it’s my hope the article, if nothing else, raises the program’s profile.

When I moved to Connecticut in 1995, I earned $21,000 a year, equivalent to about $35,000 today. I often think about how difficult it would be to live on that amount now, in part because of the increased tax burden. Back then, Connecticut only had income-tax brackets for the highest earners, but today anyone making $1 or more has some liability. I can’t imagine squeaking by on $35,000 and yet having to pay income tax on it.

At 3 percent for the lowest bracket, I’d be paying $1,050 to the state, which is very nearly the median monthly rent in Connecticut.

It’s incredible how low earners in this state are screwed, particularly by taxes. The issue of raising the minimum wage receives a lot of airtime, even though less than 1 percent of the American population earns the federal minimum wage or less (caveat: the fed’s minimum wage is very low — $7.25 an hour). In the article I cite Pew Research, noting that 3.3 million Americans earn the federal minimum wage or less, but that number is from 2013. According to the Bureau of Labor Statistics, the total decreased to 1.8 million by 2017.

In contrast, 25 million received a refund via the federal EITC in 2018 — nearly 14 times the number of people earning the federal minimum wage or less. Many more people are impacted by the EITC than would be affected by raising the minimum wage. Don’t forget that raising the minimum wage also results in layoffs.

When you hear cries from certain quarters saying we need to raise taxes, what they really mean is the income tax (and maybe capital gains taxes too) because that’s our only progressive tax — that is, the more you make, the higher percentage you pay.

What they ignore — or maybe don’t want to admit — is that *everybody* pays taxes, including low earners. Low earners pay sales tax. Low earners pay property taxes through their rent or mortgage, and in Connecticut on their cars too. Low earners pay tariffs. Low earners pay payroll taxes. Demands for more taxes means just that: more taxes for everyone, not just for the reviled rich.

This is one of the few times you’ll ever see me boosting an entitlement program but if we’re going to have a system that uses tax money to fill the potholes (just kidding — most of our taxes go to pay interest on debt and to bomb people in other countries), then it shouldn’t be done on the backs of those living closest to the edge. The EITC is something we should keep in Connecticut.

The Road to the Senate Is Paved With Lawsuits

Over at the Yankee Institute I have an article on HB 7222, a bill currently sitting before the Joint Committee on Judiciary which would enlarge the powers of Connecticut’s attorney general, William Tong, to take action in civil-rights cases.

In the aftermath of last summer’s Masterpiece Cakeshop v. Colorado Civil Rights Commission ruling by the US Supreme Court — in which the court sided with the baker who refused to create a cake for a gay wedding — Tong promised on the campaign trail to create a civil-rights division at the AG’s office. …

HB 7222, if made into a law as written, would allow the attorney general to investigate allegations that someone has threatened, intimidated, or coerced somebody else from exercising their civil rights. This would include criminal acts of bias or bigotry, all of which are felonies in Connecticut.

While I don’t object to the AG opening a civil-rights division, I’m very worried about the draconian language specific to HB 7222, which robs the accused of due process and puts them on the hook financially the minute the AG initiates an action. I won’t repeat those criticisms here; instead, you can read my article at Yankee.

The biggest violator of civil rights is government, full stop. It was government that enforced Jim Crow; it was government that refused to acknowledge gay marriages. If a baker doesn’t make me a cake for my gay wedding, I have multiple avenues of recourse: I can file a complaint with our Commission on Human Rights and Opportunities, and/or I can simply go to another bakery. But when the violator is government itself, I have little relief except through their own courts.

From justice reform to overworked and underfunded public defenders, there’s plenty of civil-rights beef in this state for a hungry AG to chase. However, I’m skeptical that Tong is interested in taking on government bodies, which is why I worry about the bill’s language — it’s aimed at private citizens or companies who rouse his ire, not at municipalities or public bureaucracies.

While writing the story, I kept asking the AG’s spokeswoman what kinds of actions Tong was interested in taking if the bill passed. Would there suddenly be a crackdown on bigoted bakeries? Or would he sue the police departments of municipalities cooperating with ICE in tracking the whereabouts of illegal immigrants, as was revealed last week by the ACLU? In other words, was he planning to sue private citizens or take action against government nonfeasance or malfeasance? She didn’t answer my question, but instead told me the AG would do so himself in his testimony before the Joint Committee, which occurred on Friday.

Reading Tong’s testimony (pdf) has only slightly mollified my concerns. In it, he cites several recent incidents as examples his office would investigate:

The Islamic Center in New London receives fake poison in the mail, or Klansmen ride in Stafford Springs.

African-American and Latinx people in Hartford are denied safe, quality housing while the federal Department of Housing and Urban Development sits on its hands.

Immigrants in our cities and towns are subjected to large-scale, systematic wage theft.

Connecticut residents with disabilities fear being pushed out of jobs because a big box store has decided to reclassify their position without accommodation.

Somebody sending poison, fake or otherwise, through the mail is a straight-up crime. Keep in mind that in Connecticut, there’s a strict division of responsibility between the attorney general, who pursues civil actions, and the chief state’s attorney, who prosecutes criminal charges, so this case would fall squarely under the latter’s jurisdiction. Moreover, terrorism through the mail is a federal crime and the Postal Inspection Service would be all over this long before the AG arrived on the scene. I don’t see what Tong could do beyond sue the culprit who should already be in prison.

As for the Klan incident, it was hardly a “ride.” Police suspect it was a handful of dumb teenagers at a party. Tong might as well sue the governor of Virginia while he’s at it.

The other three examples are more relevant, although it’s still unclear what action Tong would take in each of those cases. Sue HUD? Sue the feds to bring about immigration reform, so that more immigrants are legalized and thereby on the books? Again, no answers. Keeping a close eye on Walmart is probably the only thing Tong and I agree on.

More instructive, however, are the five cases Tong further lists in which state attorney generals — armed with the same kind of power granted by HB 7222 — won civil-rights victories, most of them through settlements rather than through the courts. The opponent in each case he mentions is a private company or institution.

Which I think is the clearest answer I’m gonna get. Tong isn’t interested in suing police departments cooperating with ICE. He isn’t interested in suing HUD or the Department of Homeland Security. He’s looking to sue companies.

And it’s not a bad strategy when you consider Tong’s long game. Tong clearly has ambitions for national office: he ran for Lieberman’s senate seat in 2012, only to lose to Chris Murphy in the primary. Our other senator, Richard Blumenthal, is 73. Winning settlements against big companies is a great way for Tong to build his brand and increase name recognition for the day when Blumenthal’s seat comes up for grabs. After all, it worked for Blumenthal himself, who forged his career with consumer-protection victories as our state attorney general.

The Latest

Over at the Yankee Institute blog, I interviewed Frank Cortese, operations manager for a Greenwich-based fuel and energy company, who said the installation of tolls on Connecticut’s highways would cost him more than $57,000 during the winter months and maybe even $72,000 a year — a cost he will pass down to his customers.

Separately I also reported on a bipartisan movement to eliminate Connecticut’s Business Entity Tax, which is a tax businesses pay simply because they, well, exist.

The Land of Steady Hazards

Longtime readers may have noticed that in recent months I’ve dialed down my griping about the state of Connecticut on this blog.

Because why give away the milk for free! Over at the Yankee Institute, I’ve been turning my criticisms into hard currency with a series of spitballs aimed at Hartford.

To wit:

Most economists agree that while raising minimum wages benefits a majority of workers, some jobs are lost no matter how small the increase. A paper by a DC think tank duplicated the methodology of a similar Congressional Budget Office study and found that those job losses affect young, unskilled entry-level workers, thereby disproportionately hitting the workforce in already struggling cities like Bridgeport and Hartford. The study suggests that governments can aid low-income workers without jeopardizing any jobs by instead expanding the Earned Income Tax Credit. I didn’t know this when I wrote the piece, but in 2011 Connecticut cut the state EITC to 25 percent of the federal credit, down from 30 percent.

Just last week I wrote about how CT’s Department of Labor mandates that employers report all new hires to the state within 20 days. The state even has a website telling you how to do it: just print out a form and either mail or fax it in. That’s right, unless you’re willing to use the state’s hyper-complicated FTP format, there’s no way to send the information online because the website hasn’t worked for at least three years. Instead you must send a piece of paper to Hartford, where presumably somebody manually punches it into a database. Connecticut — the land of tomorrow!

But my favorite so far has been a piece of investigative journalism in which I reported the state gave $5 million to a Wall Street company to move from White Plains to Stamford. With companies like Aetna and General Electric routinely abandoning Connecticut for more salubrious shores, Malloy’s Department of Economic and Community Development has been throwing corporate welfare at anybody with more than two house elves on the payroll if they’ll move to CT or, if they’re already here, just simply stay put. In this case, the DECD handed out a $1 million grant and a $4 million loan to a company called FSC CT, of which only $1 million had to be paid back.

Except it turns out the guy running FSC CT, Leonard Tannenbaum, was a crook:

In October 2014, Tannenbaum went public with an IPO for Fifth Street Asset Management, a company which in turn invested in two other publicly traded companies he also started, Fifth Street Finance (FSC) and Fifth Street Floating Rate Corp. (FSFR). Both FSC and FSFR were business development companies (BDCs), financial instruments that offer loans to small and mid-sized businesses.

On the eve of the IPO, Tannenbaum owned 94 percent of FSAM, raising the value of his shares to $684 million once it went public.

Yet not long after the IPO, FSC revealed that many of its loans to businesses were considered nonaccrual loans, meaning they couldn’t generate interest because the borrowers hadn’t been paying them back and were in danger of default. On top of that, FSC had been overpaying fees to FSAM.

A bunch of lawsuits and one SEC investigation later, the whole pyramid collapsed, burying at least $2 million of the loan irretrievably. The state will probably never see the $1 million grant again either.

There’s more of my work to come at the Yankee Institute. In the meantime, Yay, Connecticut!