AUGUSTA — The state’s earned income tax credit for low-to-moderate-income taxpayers would double under a bill approved Tuesday in the Maine House of Representatives.

At the same time, the House rejected a bill to exempt 50 percent of capital gains income subject to federal tax from the Maine income tax.

Both were party-line votes carried by Democrats, who hold the legislative majority.

“Passing this bill will provide a targeted tax cut to families who work and have kids but aren’t paid much at their jobs,” said Rep. Adam Goode, D-Bangor, in debate on the earned income credit bill. “We know that working families who make their money through earned income are likely to spend any financial boost quickly and locally.”

It is estimated that the earned income credit bill would cost the state nearly $68 million in revenue through 2017. It would also likely require hiring two new tax examiners.

The proposal, which will be sent to the Maine Senate, would also make the credit fully refundable if the payer’s tax burden is zero. Currently in Maine, the tax credit is partially refundable, according to the National Conference of State Legislatures.

In the 2012 tax year, the maximum federal earned income credit for a family with two children was $5,236, but that family must have made less than $47,162 if the married couple filed jointly, according to the Internal Revenue Service.

House Minority Leader Kenneth Fredette, R-Newport, said while he supports the concept of the bill, the Legislature must prioritize.

The bill’s cost “just doesn’t fit the equation at this point in time,” he added.

The Republican-sponsored capital gains bill, voted down in the Taxation Committee, is estimated to cost nearly $191 million through 2017 and also reduce municipal revenue sharing by nearly $2.5 million over that period.

Rep. Richard Malaby, R-Hancock, the bill’s sponsor, said the estimate merely counts revenue lost, ignoring a potential uptick in capital gains investment.

“When it comes to capital gains income tax, a lowering of the rate leads to an increase in activity,” Malaby said.

But Rep. Brian Jones, D-Freedom, said the tax cut isn’t likely to increase economic activity enough to offset the anticipated revenue loss.

Michael Shepherd can be contacted at 620-7015 or at:

mshepherd@mainetoday.com

Twitter: @michaelshepherdme