Expanding Refundable Tax Credits Would Help Many American Indian and Alaska Native Households, Reduce Poverty

Expanding the Earned Income Tax Credit (EITC) and Child Tax Credit, as several proposals before Congress would do, could benefit hundreds of thousands of American Indian and Alaska Native (AI/AN) families nationwide, our new analysis shows.

In 2019, the EITC and Child Tax Credit will boost the incomes of about 400,000 AI/AN households, which disproportionately benefit from the tax credits, as we’ve explained. Still, the credits could do more. Several legislative proposals would make the EITC, Child Tax Credit, or both more effective, including the Working Families Tax Relief Act; the American Family Act; and the House Ways and Means Committee-passed Economic Mobility Act. For example, the refundable credit expansions in the Working Families Tax Relief Act and the American Family Act would boost the economic well-being of more than 500,000 and 300,000 AI/AN households, respectively. (See note below for a discussion of these data.)

Stronger income assistance — such as from these credits — is linked with a series of gains for children, research has repeatedly shown — healthier birth weights, better childhood nutrition, higher school enrollment, higher test scores, higher high school graduation rates, and higher rates of college entry.

The Working Families Tax Relief Act — co-sponsored by 46 of 47 Democrats in the Senate and introduced by Reps. Dan Kildee and Dwight Evans in the House — would make the Child Tax Credit fully refundable so children in the poorest households would receive the full credit and create a larger, fully refundable Young Child Tax Credit of $3,000 per child for children under age 6. It would also increase the EITC for families with children by roughly 25 percent.

More than 300,000 American Indian and Alaska Native families with children would benefit from the bill’s EITC and Child Tax Credit expansions. For an American Indian mother of a 4-year-old and a 7-year-old who makes $20,000 as a home health aide, for example, the bill would raise her Child Tax Credit by $2,210 and her EITC by about $1,460, for a combined gain of about $3,670. If the mother were unemployed and hence had no earnings, the bill would raise her Child Tax Credit from zero to $5,000.

The bill also would substantially increase the EITC for AI/AN workers who aren’t raising children at home. It would raise the maximum EITC for working adults not raising children at home — the lone group that the federal tax code now taxes into, or deeper into, poverty — from roughly $530 to $2,100 and raise the income limit to qualify for the credit from about $16,000 for a single individual to about $25,000. It would also expand the age range of eligibility for the tax credit from the current 25-64 to 19-67. Under this bill, after-tax incomes would rise for about 200,000 AI/AN working childless households.

The American Family Act would both make the Child Tax Credit fully refundable and increase it for all qualifying children, from its current $2,000 per child to $3,600 for children under 6 and to $3,000 for older children. An unemployed American Indian mother with one young child and one older child, who today is ineligible for the Child Tax Credit because of her lack of earnings, would receive a credit of $6,600.

American Indians and Alaska Natives faced a poverty rate of about 17 percent and a child poverty rate of about 15 percent in 2018 under the Supplemental Poverty Measure (SPM) — a more comprehensive metric than the official poverty measure, which counts only cash income. The 17 percent AI/AN poverty rate, which is higher than the overall national poverty rate of 14 percent under the SPM, reflects a variety of factors, including a history of colonialism, racism, and forced removal; ongoing discrimination in hiring, pay, and housing; and underinvestment in tribal governments and AI/AN communities.

All of these bills would have significant anti-poverty impacts. The Working Families Tax Relief Act would lift more than 50,000 American Indians and Alaska Natives out of poverty, including about 20,000 children, and lift another 200,000 AI/AN people, including roughly 70,000 children, closer to the poverty line. Ultimately, the bill would cut the AI/AN poverty rate under the SPM to about 15 percent and the child poverty rate to about 12 percent.

The millions of American Indians and Alaska Natives who live in the United States are members of over 500 tribal nations. The more than 500,000 American Indian and Alaska Native households that the Working Families Tax Relief Act would benefit include about 84,000 Navajo Nation households, 59,000 Cherokee Nation households, and 22,000 Choctaw Nation households.

The American Family Act would lift over 50,000 American Indians and Alaska Natives out of poverty, including about 30,000 children, and lift another nearly 140,000 AI/AN people, including about 60,000 children, closer to the poverty line. It would reduce the AI/AN poverty rate under the SPM to about 15 percent and the child poverty rate to about 11 percent.

The Economic Mobility Act also contains some of the same or similar provisions to the other two bills, though on a temporary basis. It would — for the next two years — expand the EITC for childless workers, make the Child Tax Credit fully refundable, and create a Young Child Tax Credit.

Note: The figures cited above are approximations based on data from the Census Bureau’s March 2018 Current Population Survey (CPS) and CBPP calculations. They rely on mutually exclusive racial/ethnic categories and exclude people who identify with multiple races or Hispanic or Latino origin; the figures would be higher if they included such individuals. A small number of individuals in this group may report American Indian/Alaska Native identity based on, for example, Mexican or South American origin, rather than membership in a federally recognized U.S. tribe. These groups cannot be identified in the CPS data. A separate Center analysis, however, used data from the 2015-2017 American Community Survey and found that after excluding those who identify their race as Mexican or South American Indian, more than 500,000 AI/AN tax filers would still benefit from the Working Families Tax Relief Act.