BEYOND THE NUMBERS
Update, July 2: we’ve added a table at the end of this post showing the number of households, individuals, and children in each state whom the Kildee-Evans bill would benefit.
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:
- For a mother of a 4-year-old and a 7-year-old who makes $20,000 as a home health aide, the bill would raise her CTC by $2,210 and her EITC by about $1,460, for a combined gain of about $3,670.
- For a married couple in which one spouse makes $45,000 as an auto mechanic and the other cares for their two young children full time, the bill would increase their EITC by about $1,460. They would also receive an additional $2,000 from the Young Child Tax Credit, for a total gain of about $3,460.
- Consider a fast-food cook who works full time at the federal minimum wage and earns $14,500, only slightly above the poverty line for a single individual (an estimated $13,340 in 2019). The cook now pays more than $1,250 in combined federal income and payroll taxes (counting just the employee share of the payroll tax); as a result, the tax code pushes her below the poverty line. The bill would increase her EITC by about $1,530, so she would no longer be taxed into poverty.
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.
|Households, Individuals, and Children Benefiting From Working Families Tax Relief Act, by State|
|State||Number of Households||Number of Individuals||Number of Children|
|Dist. of Columbia||81,000||183,000||81,000|
Source: CBPP estimates based on 2015-2017 American Community Survey data and March 2018 Current Population Survey data.
- El crédito tributario por hijos
- Federal Payroll Taxes
- Federal Tax Expenditures
- Fiscal Stimulus
- Marginal and Average Tax Rates
- Tax Exemptions, Deductions, and Credits
- The Child Tax Credit
- The Earned Income Tax Credit
- The Federal Estate Tax
- Where Do Federal Tax Revenues Come From?
- Where Do Our Federal Tax Dollars Go?