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Hala Ghali was expecting a tax refund this filing season somewhere around $5,000 or $6,000.
But when she found out how much she’d actually be getting back from the government, her jaw dropped.
Stacy Downer, her tax preparer and a volunteer with Volunteer Income Tax Assistance at the Connecticut Association for Human Services, told her the good news.
“Like $21,000,” Downer said. “It was a big, big, big deal.”
They both teared up, according to Downer, because they knew how the money could change Ghali’s life.
“I very much anticipate that a lot of my problems, if not all of my problems will be solved,” Ghali said, speaking through a translator.
Taxes are due April 18. Early data show that refunds are over 10% bigger this filing season. Some of that is thanks to federal pandemic relief from the American Rescue Plan, which expanded tax credits for Americans with the lowest incomes and those with children.
Ghali came to New Haven from Syria as a refugee with her husband and four children. In 2019, she found work with Havenly, a non-profit that supports refugee and immigrant women. Now she works at the University of New Haven as a chef.
Downer said much of Ghali’s refund came from one-time federal measures tied to pandemic relief like a couple of missed stimulus payments, and tax credits expanded under the American Rescue Plan.
The Child Tax Credit used to be a flat rate of $2,000 per child and only available at tax time. In 2021, parents could get that money in monthly payments between July and December. Some parents did not elect the installment option, and Ghali got hers as a lump sum, increasing her refund. It was raised in 2021 to $3,600 per child under 6 years old and $3,000 per child between ages 6 and 17. Families who owe little or no tax at all still get the full amount.
The American Rescue Plan also increased the amount of money and expanded the eligibility of two tax credits that help working-class Americans, both with and without children: the Earned Income Tax Credit and the Child and Dependent Care Tax Credit.
But next year those expanded federal credits will expire.
It’s crucial for the state to act to help lower and middle-income families, said Patrick O’Brien, a research and policy fellow at Connecticut Voices for Children.
“This isn’t just a giveaway to these families,” he said. “It’s helping to offset some of these regressive tax policies.”
In February, the Connecticut Department of Revenue Services released data showing that the lowest-income taxpayers pay almost four times as much in taxes as a percentage of their income as the state’s wealthiest taxpayers. Those making between around $44,000 a year and $74,000 pay around three times as much.
“The state itself is telling us that we have an unfair tax system,” O’Brien said. He’s made the case for a number of tax reforms, including creating a state Child Tax Credit and adjusting current tax brackets for inflation.
Connecticut is in a unique position to provide residents tax cuts. The state is flush with federal pandemic dollars. It has a surplus projected to be around $1.76 billion, and the rainy day fund is about to hit its maximum at $3.1 billion.
But not all that money can be put to work addressing the state’s taxation system. Pandemic relief was intended to revitalize communities, not make tax cuts, and a number of fiscal guardrails were put in place in 2017 to keep lawmakers from spending money they didn’t have.
Lawmakers will soon vote on proposals to expand some of these tax credits at the state level. Rep. Sean Scanlon has proposed a Children’s Trust Fund, which would skirt one of the fiscal guardrails —the revenue cap— to use existing funds to pay for a Child Tax Credit, an initiative to improve child care, and various supports for children’s mental health.
“The beauty of repurposing the revenue cap is that it will grow every year,” said Scanlon, who’s chair of the Finance, Revenue and Bonding Committee. “It’s not a tax increase, [and it’s] repurposing money that’s already there.”
Scanlon said he believes his plan would not endanger the state’s fiscal stability.
Gov. Ned Lamont wants to provide tax relief to Connecticut residents this session, but has yet to express support for the Child Tax Credit, saying he wants to make sure the state can afford the various tax cut proposals.
The federal Child Tax Credit expansion will almost certainly be one time only; plans to keep the expansion died in U.S. Senate negotiations. But Downer said, in doing taxes this year, she saw that the monthly payments already helped parents.
“What I see is people really did apply that to the things that was most important to them in the household,” she said.
Data backs this up: Over half of Connecticut families receiving the money bought essentials like food, clothing, and utility bills, according to an analysis by CT Voices For Children. Once the payments ended, 3.7 million children dipped back into poverty, according to Columbia University’s Center on Poverty and Social Policy.
For Ghali, the money is propelling her future in a positive direction. She used her refund to pay off loans. Now she’s saving money with the intention of buying a home for her family and dreaming about what life could look like.
“Every one of my kids would have their own room,” she said, “and I’d be able to give them anything they want.”
Jad Maayah from Havenly provided translation services for this story.