Key Step Forward: Tax Proposal Makes Critical EITC and Child Tax Credit Provisions Permanent

Meredith Dodson, RESULTS Director of US Poverty Campaigns
December 16, 2015

Last night Congressional leaders unveiled fiscal year 2016 spending and the tax legislation. The deal makes a number of business tax credits permanent, while extending others for two or five years. Most significant for RESULTS advocates, the bill finally makes the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) provisions from 2009 permanent. If passed, this means the EITC marriage penalty reduction and increased EITC for larger families, along with the lower $3,000 income eligibility threshold for the CTC, would all become permanent law. This will finally give working families the peace of mind in knowing that their EITC and CTC will not drop or disappear after 2017. As a reminder, if these provisions expire, 16 million Americans would fall into poverty or deeper into poverty, and over 50 million Americans, including 25 million children, would lose some or all of their tax credits.

Saving these key tax credits for millions of low-income working families in this proposed tax package is a huge victory for RESULTS advocates and our allies! Just a year ago, Congress was ready to make the business tax credits permanent without anything for working families. But your tireless efforts over the past two years, including at least 225 face-to-face lobby meetings, 140 EITC/CTC media pieces (see all of RESULTS 2015 U.S. Poverty print media here), and thousands of letters, e-mails, and phone calls, have us poised to see this five-year effort to do what’s right for working families come true.

This is not a perfect package by any means. In particular, we are disappointed by several aspects of this deal:

1. Congress fails to fix the gap in the EITC for childless workers. Currently, adults without children in the home (including non-custodial parents who pay child support) receive a very small EITC (maximum of $500). Consequently, these workers are the only group that the tax code actually taxes into or deeper into poverty. House Speaker Paul Ryan, President Obama, and others have proposed expanding the EITC for childless workers and lowering the eligibility age for this credit from 25 to 21. These changes would benefit 13.5 million Americans, including 1.5 million non-custodial parents, and would lift 500,000 hardworking Americans out of poverty. We will build on the bipartisan support for fixing the gap in the EITC by pushing for this change in future tax legislation.

2. This proposal does not index the Child Tax Credit to inflation. Despite a major push by House Democratic leaders, the $1,000 per child amount will remain fixed. The proposal also does not lower the minimum income threshold for the CTC from $3,000 to zero to ensure the most vulnerable families can claim the credit. 

3. This proposal negatively targets immigrant families. It creates a two-tier tax system that would bar millions of taxpaying immigrants who receive Social Security numbers, including DACA and DAPA taxpayers, from claiming back EITC payments. It would also denying newly legalized domestic violence survivors and others from doing the same. In addition, this proposal creates additional barriers on some who wish to file taxes using an Individual Taxpayer Identification Number, making tax compliance for working immigrant families even more difficult.

4. This is a large, unpaid for tax bill that adds to the billions to the deficit. We and many other advocates would have preferred that this and other tax legislation included offsets t pay for them. However, given the history of Congress passing unnecessary tax cuts without paying for them, and they would have done so again even without the EITC and CTC, this is the best opportunity to make the EITC and CTC improvements permanent.

Despite these important drawbacks, ensuring these EITC/CTC provisions are made permanent in this broader tax deal is an important accomplishment.

The House is expected to vote on tax bill tomorrow (Thursday) and the spending bill Friday, and the Senate likely will vote on them as one bill on Friday.

RESULTS volunteers are using the media to highlight the importance of the proposal to make the EITC/CTC provisions and reinforce the message that this needs to get done. We want to make sure this key victory for more than 50 million Americans doesn’t get overlooked with a last flurry of media pieces. This will not only highlight this accomplishment but also lay groundwork for other efforts to move anti-poverty policies in the future. Join us by tailoring your own letter to the editor using our online alert and salute this important victory for millions of low-income Americans!