Good news and bad news for Vt. poor
By Peter Hirschfeld
Vermont Press Bureau | January 13,2013
MONTPELIER — Sheila Reed had been waiting years to hear a Vermont governor deliver the good news unveiled by Peter Shumlin last week.
Lack of access to childcare, Reed says, is one of the chief impediments to success for many of the low-income families her organization serves. So when the Democratic governor used his inaugural address to announce an additional $17 million for childcare subsidies, she says, “we were completely thrilled.”
“The childcare financial assistance program is unsustainable in its current structure,” says Reed, associate director of the Montpelier-based nonprofit, Voices for Vermont’s Children. “This is the investment we’ve needed to ensure these families have an opportunity to advance.”
Like other advocates for poor Vermonters, however, Reed’s elation was short-lived. Immediately after promising “the single largest investment in early childhood education in Vermont’s history,” Shumlin said he’ll fund it by eliminating the bulk of an “earned-income tax credit” used to help poor people stay afloat financially.
“In the next breath, when we heard it was coming from the earned-income tax credit, we were in shock,” Reed says. “We cannot take what is one of the best safety programs left in this state and basically destroy it on behalf of other low-income families.”
Reed isn’t the only opponent of a plan that has raised the hackles of Democratic lawmakers, many of whom derided the proposal last week as a nonstarter.
“He wants to take money from poor people and give it to other poor people?” said Rep. Suzi Wizowaty, a Democrat from Burlington. “I hope he comes up with a serious plan to fund this investment, and I look forward to seeing it soon.”
House Minority Leader Don Turner said even Republicans have reservations about cutting a program that affects about 45,000 low-income tax filers.
“The question we need to ask is what happens to these people, especially the ones on the really low end of the income scale, if we pull the rug out from under them with this,” Turner said.
Human Services Secretary Doug Racine says he knew the proposal would generate controversy, and that advocates in the child-welfare community have “mixed feelings” about whether it’s the right thing to do. But he and other administration officials are defending the reallocation as a more effective use of limited human-service resources.
“Yes, it is going to be a sacrifice for some individuals, but we feel that the state as a whole will benefit more from having this limited pot of money helping families with young children than where it is now,” Racine says.
The earned-income tax credit is something of a misnomer, given that many of the beneficiaries receive refunds in excess of what they pay in taxes. The $25 million program pays for annual lump-sum checks to about 45,000 residents; Shumlin’s proposal would reduce the size of those checks by about two-thirds.
The average hit on a recipient would be about $376, according to data from the Vermont Department of Taxes. The maximum benefit reduction would be $1,214. Qualifying income thresholds range from a maximum annual salary of $13,660 for individuals to $49,000 for households with three or more children.
The state EITC piggybacks off the federal version of the tax credit. Susan Bartlett, the newly installed director of special projects at the Agency of Human Services, says Vermont’s earned-income tax credit is among the most generous in the nation.
Of the 25 states that provide some kind of match for the federal EITC, Vermont’s is the second highest at 32 percent. The federal portion of the EITC would not be affected by Shumlin’s plan.
“What we’re doing is lowering the match from 32 percent to 11 percent,” Bartlett says. “And that still keeps us in the middle of the pack nationally.”
Not everyone who receives the earned-income tax credit would see benefits under the reallocation, which, according to Racine, would mean increased childcare subsidies for about 5,900 families.
“We’re saying instead of spreading it across a large number of families, let’s set a priority to help young children, and families with young children,” Racine says.
Rep. Chris Pearson, leader of the House Progressive caucus, says the options aren’t so narrow.
“I’m not sure it has to be a choice between improving access to childcare and taking money from families that can just about least afford it,” Pearson says.
Pearson is already working with lawmakers on a counterproposal that would keep the $17 million appropriation — double what Vermont spends on childcare subsidies now — but raise new revenues to pay for it.
The package will likely include tax hikes for wealthy Vermonters, and possibly the elimination of certain tax exemptions that tend to benefit richer residents.
Chris Curtis, a staff attorney for Vermont Legal Aid, says Vermonters who qualify for the earned-income tax credit are already doing their part to improve their prospects in life.
“You can’t get this credit if you’re not working,” Curtis says. “For years, efforts have been made to expand this program to reward people for that hard work. And it would be extremely harmful to take that away from them now.”
Senate President John Campbell and House Speaker Shap Smith both say they’re eager to hear more about Shumlin’s plan.
“I think if we want to be effective legislators and effective guardians of the public trust... then we have to be willing to ask questions about the money we’re spending, and whether we’re spending it in the most effective manner,” Smith said.