Unnecessarily complicated state child tax credit
It’s safe to assume that the Connecticut child tax credit, like the federal version it’s modeled on, was enacted with the best of intentions. There are undoubtedly people who need a break in times of economic uncertainty, and the state is trying to help provide one. It’s a good political idea and one that makes sense in an era of budget surpluses.
The execution, on the other hand, was something else entirely.
The deadline to apply for a $250 tax refund per child is July 31, with as many as 350,000 poor and middle-class families eligible for the pandemic relief plan. But time is running out, state officials recently said only about half of what many have asked for help. The program’s advocates say they’re confident last-minute applicants will make up much of that difference, but it’s inevitable that a number of eligible people won’t get the credit.
All of this raises an important question: was there a better way to do this?
The state, after all, has information about everyone’s income and how much tax they paid. Therefore, the eligibility information seems to already be in official hands. Why, then, is it up to registrants to determine their own eligibility and bother to complete an application?
The rebate is available to single parents earning $100,000 or less and couples earning $200,000 or less. Households must file a 2021 federal income tax return to receive the benefit. The child tax refund is expected to bring in $125 million for families across the state.
Adding to the confusion is the federal child tax credit, which was expanded under US Representative Rosa DeLauro, but only temporarily. That money came directly to families without the need to apply, but a plan to extend the expanded credit in future years failed in the US Senate.
To demonstrate the benefit, half of the expanded federal credit was sent directly to families, which had the effect of reducing refunds at tax time (because the money had already been paid out). Whatever the intentions of the architects of the plan, it caused confusion.
And it’s now even more confusing, as many filers with children seem unsure whether claiming the state tax credit will reduce their returns come next year’s tax season. But the answer is simple – if they don’t claim the state tax credit, they won’t get the money.
There’s a reason people dread filing their taxes, and that’s part of the reason – even well-meaning plans to put money in people’s pockets are unnecessarily confusing and add extra work for people who don’t have time for that sort of thing. If the state wants to give money to people, it has better ways of doing it.
This is something that state governments and the federal government need to keep in mind going forward.
The State Department of Tax Services website allows households to apply online. Applicants can also call the DRS at 860-297-5962. Anyone eligible is encouraged to do so.