Measure to restore state's Earned Income Tax Credit dies in committee

More than 40 organizations that try to help Colorado's poor families suffered a defeat Wednesday at the state Capitol as lawmakers killed a plan to restore a tax credit for people with low incomes.

The plan was to restore Colorado's dormant Earned Income Tax Credit, a financial boost that's worth a few hundred dollars to most families that claim it. Supporters said the credit would help pay for basic expenses such as car repairs and school supplies.

But during hours of testimony in excruciating detail, state welfare officials argued the plan would hurt the poor by taking money away from programs that aid families in the most desperate financial circumstances.

The plan, HB1362, failed on a 7-4 vote in the House Finance Committee. El Paso County's representatives on the committee, Colorado Springs Republicans Douglas Bruce and Kent Lambert, opposed the measure.

Restoring the credit would have cost an estimated $54 million in 2009 and $56 million the next year.

Most of the money would have been taken from an allocation the state gets from the federal government to cover welfare payments under the Temporary Aid to Needy Families program. Supporters said Colorado's 64 county welfare departments could have made up the difference by dipping into their $136 million in reserves. The reserves make up about a year's worth of welfare payments across the state.

"Clearly, the reserves are too large and should be spent on families," said Kathy White of the Colorado Fiscal Policy Institute, a Denver-based think tank that led efforts to pass the measure.

More than 40 other groups supported the credit, such as the Women's Foundation of Colorado and Denver Urban Ministries.

Colorado's Earned Income Tax Credit has been suspended since 2002 because the state had no money for it. When it was active, it mirrored the federal credit by the same name, giving 10 percent of the money available to lowincome residents who file federal tax returns.

Welfare officials said they couldn't spare the money, especially given separate plans to increase welfare payments to families and the federal government's intention to slash the state's annual share for the program by $14 million starting next year.

Ten percent of the money for the tax credit would have come from the state Unemployment Insurance Trust Fund, an account that provides payments for people who lose their jobs. Several business groups opposed using that money for the credit.

White and other private advocates for the poor said the tax credit would help people stay off welfare. They said restoring the credit was just one step toward helping roughly 264,000 families make ends meet without getting other help from the government or charity.

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