An income tax credit approved by the Legislative Assembly last year could cost the state more than expected.
State Tax Commissioner Brian Kroshus briefed the Legislative Assembly’s Interim Government Finance Committee on Wednesday on the impact of the two-year tax credit, estimated by the tax office at $211 million. dollars and paid from the surplus balance of the last two-year budget cycle.
The credit can reach $350 per year for individuals or $700 per year for people filing jointly. The credit cannot create a negative tax debt. For example, if a person owes $450, the credit will reduce that amount to $100. If he owes $250, this will remove his obligation to pay, but will not reimburse him $100.
More than 253,000 of some 380,000 tax returns have qualified for some or all of the credit, claiming $96 million of the estimated $104 million for the 2021 tax year as of Tuesday.
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“There’s not a lot of wiggle room left, if you will,” Kroshus said, adding that his office is watching the number “very closely, very closely.”
His office expects to receive an additional 95,000 returns. He expects 60,000 of them to be eligible for credit. Refunds took 10 to 14 days for taxpayers to receive them, he said.
Kroshus said: “I think it’s possible that it will exceed (104 million dollars) by several million, but I don’t think it will be a big number if it does, not that it isn’t. important – it is.”
If more than $104 million is claimed, the state would “potentially receive a little less revenue,” according to Legislative Council senior financial analyst Adam Mathiak.
“It’s not like there’s a definitive line in the sand that if you go over that you can’t pay any more appropriations or you have to ask the Legislature to step in and make changes. There would simply be less revenue if more credits are paid or needed,” Mathiak said.
Income tax in the state’s 2021 fiscal year generated more than $465 million, or about 14.5% of total general fund revenue of $3.2 billion.
State lawmakers heard last month how tax breaks have contributed to a persistent budget gap between revenue and ongoing spending.
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