Senior Director of Federal Tax Policy
Independence Day reminds us of the freedoms we enjoy, and of those who have served or are serving our nation in uniform to preserve those freedoms. Unfortunately, many veterans struggle to move ahead, or even to stay afloat, because their jobs don’t pay enough to ensure that they can afford the basics for themselves and their families. An important proposal to support low-wage workers is the Working Families Tax Relief Act, which would help 46 million households, including 3 million veteran or active-duty households.
Proposed by Senators Sherrod Brown, Michael Bennet, Dick Durbin, and Ron Wyden and Representatives Daniel Kildee and Dwight Evans, the legislation would strengthen the highly successful Earned Income Tax Credit (EITC), raising the incomes of low-wage workers. It would also improve the Child Tax Credit by helping millions more kids in low- and moderate-income families get a good start in life.
The legislation would:
Among veteran and active-duty families, the benefits would be shared broadly across racial groups and regions, from 4,300 households in Vermont to 280,300 in Texas (see data below for other states). In about 85 percent of the 3 million households, the head of household or spouse is a veteran; in 17 percent, the head of household or spouse currently serves in the military (in a small number of households, one spouse is a veteran while the other currently serves).
The Working Families Tax Relief Act would begin to address decades-long wage stagnation by giving working people, including veterans, a needed boost. Its extension of the EITC’s age range would be particularly helpful to young veterans transitioning to civilian life. Consider, for example, a 23-year-old veteran who recently completed his Army service and is now working full time as a fast-food cook at the minimum wage. He earns $14,500 and, after paying taxes, has income that puts him below the poverty line. Under the legislation’s stronger EITC for childless adults and its extension of the EITC age eligibility, he’d be eligible for the credit, boosting his income by $1,530 and keeping him from being taxed into poverty.
For a veteran who is a single mother of a 4-year-old and a 7-year-old who earns $20,000 a year as a home health aide, the bill would raise her EITC by about $1,460 and her Child Tax Credit by $2,210, for a combined gain of about $3,670. That would mean more money to buy basic necessities, make needed home repairs, maintain a car to get to work, or, in some cases, get the additional education or training needed to secure a better, higher-paying job. And the income boost would help her children, as well. Young childhood is an important and vulnerable time, during which better family income can improve poor children’s life opportunities, research shows.
The 2017 tax law provided the overwhelming share of its benefits to the highest-income people and most profitable corporations. Policymakers should revisit the 2017 tax law and, when they do, they should reallocate the tax benefits by strengthening the EITC and Child Tax Credit, as the Working Families Tax Relief Act (and other similar bills) propose.
|APPENDIX TABLE 1|
|Veteran or Active-Duty Households That Would Benefit From Working Families Tax Relief Act, by State|
|State||Number of Households|
|Dist. of Columbia||3,600|
Source: CBPP estimates based on 2015-2017 American Community Survey data and March 2018 Current Population Survey data.