Director of Federal Tax Policy
House Ways and Means Committee members Dan Kildee and Dwight Evans introduced a bill today to substantially expand the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), which would boost the economic well-being of 46 million low- and moderate-income households with 114 million people, we estimate based on Census data.
The Kildee-Evans bill is the companion to a bill (S.1138) that Senators Sherrod Brown, Michael Bennet, Richard Durbin, and Ron Wyden, with 42 co-sponsors, introduced earlier this year. Some of its EITC provisions are similar to ones that Ways and Means Chairman Richard Neal, Rep. Bill Pascrell, and other policymakers have championed. Its CTC expansions are similar in some ways to proposals from Reps. Rosa DeLauro and Suzan DelBene.
The EITC and CTC increase employment, reduce poverty, and improve children’s life prospects, studies indicate. The bill’s EITC and CTC expansions — combined with overdue legislation to raise the minimum wage and provide paid family and medical leave, among other things — would help address the long-term wage stagnation that has affected households of all racial and ethnic backgrounds that earn low or modest wages.
The bill would expand the EITC for families with children by roughly 25 percent; substantially strengthen the very small EITC for workers who aren’t raising children in their homes (the sole group that the federal tax code now taxes into, or deeper into, poverty); and provide a match for Puerto Rico’s new EITC. By themselves, these EITC expansions would benefit an estimated 35 million households with 75 million people.
The bill would make the CTC fully refundable so children in lower-income households, including those with little or no income, can benefit fully from it. Today, the CTC provides little or no help to millions of children and families with low incomes — the people who need it most. This fully refundable CTC is similar to a policy that a National Academy of Sciences committee made the centerpiece of its proposal to shrink child poverty.
The bill would also create a larger, fully refundable Young Child Tax Credit for children under age 6. This is a period of great importance and vulnerability in children’s lives, during which more adequate family income can improve poor children’s life opportunities, research shows. The Young Child Tax Credit would raise these families’ CTC to $3,000 per child under age 6, up from the current maximum of $2,000.
Taking its EITC and CTC expansions together, the bill would lift 29 million people above or closer to the poverty line, including 11 million children. It would cut the child poverty rate from 15 percent to 11 and cut the deep poverty rate among children — the share with family incomes below half of the poverty line — from 5 percent to 3. It would cut the overall poverty rate from 14 percent to 12.
A few examples illustrate the bill’s impact:
The EITC and CTC expansions that the Kildee-Evans and other bills propose should be central to the coming debate over how to restructure the 2017 tax law, which largely overlooked working-class Americans while providing large tax cuts to affluent households and profitable corporations. Undoing its poorly designed or targeted provisions should generate savings that could go in part to low- and moderate-income households through tax-credit expansions like these.