Lawmakers are considering a bill that would expand the state tax credits available to parents and other households with dependents.

Advocates said the proposal could help bring back some of the economic gains families saw during the pandemic with the expanded federal child tax credit, which reduced Maine’s child poverty rate by 40%. But that enhanced child tax credit was not renewed by Congress, causing families to backslide.

“We have evidence that families have reentered times of hardship,” said Stephanie Eglinton, executive director of the Maine Children’s Alliance.

The bill sponsored by House Majority Leader Maureen “Mo” Terry, D-Gorham, would remove minimum income requirements for the state’s current dependent exemption tax credit, making it available to the neediest Mainers with dependents. It would also increase the annual credit from $300 to $350 per dependent and index that credit to inflation.

To qualify for the existing state credit, a family must have taxable income, which excludes Maine’s neediest families. Terry’s bill would open up the program to the lowest-income families.

“This bill would mean this credit would become available to so many more children whose families are locked out because their incomes are too low,” she said. “Not being able to access a tax credit because you don’t make enough money makes no sense.”

The credit would be available for each dependent who has resided with the taxpayer for at least six months of the tax year and has more than 50% of their financial support provided by that taxpayer.

The Mills administration testified against the bill as written, saying it would be difficult for the state to make determinations about who qualifies as a dependent and other technical concerns.

Michael Allen, associate commissioner of tax policy at the Department of Administrative and Financial Services, said some components of the bill could be included in an income tax relief package.

“The administration opposes this bill taken as a whole but not all its elements,” Allen said. “For example, enhancing the current dependent tax exemption credit and indexing for inflation could be one component of a workable income tax relief and assistance proposal or package.”

Republicans have been pushing for income tax cuts, primarily for low and middle-income taxpayers, amid historic state revenues and surpluses. A variety of tax reform proposals have been introduced, ranging from eliminating income taxes to increasing taxes on the highest earners, but none seems to be gaining traction.

In response to an updated state revenue forecast projecting an additional $294 million in the next two years, Gov. Janet Mills, Senate President Troy Jackson, D-Allagash, and House Speaker Rachel Talbot Ross, D-Portland, issued statements stressing the need to invest that revenue, without mentioning possible tax cuts.

The federal child tax credit was expanded in 2021 to include families with little to no taxable income. Credits of $3,600 were available for each child between the ages of 0 and 5, and $3,000 for kids between the ages of 6 and 17.

That policy led to a historic low rate of childhood poverty – just 5.2% – according to a study by the U.S. Census Bureau.

Proponents of Terry’s bill, L.D. 1544, conceded that the state benefit would not be as significant as the expired federal credit, but argued that every little bit helps. And they hope that action at the state level would translate into federal action.

“It seems like a small amount of money, $50 more, but for the families we are talking about, that $50 is a huge amount,” said Megan Hannon, director of the Maine Community Action Program. “It will lift those families closer to a living, breathing, fulfilling life.”

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