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Working-Family Tax Credit Essentials, Part 3: Making Key Provisions Permanent

January 21, 2015 at 1:14 PM

Our last post on our new chart book highlighted ground-breaking research suggesting that the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) help families at virtually every stage of life.  Today, we’ll explain why making several key CTC and EITC provisions permanent should be a top priority for Congress.

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In 2009, policymakers lowered the earnings needed to qualify for a partial CTC, thereby expanding the credit for millions of low-income working families and making other families newly eligible for a partial credit.  They also raised the income level at which the EITC begins to phase down for married couples to reduce the marriage penalty some two-earner families face in the EITC.  And they boosted the EITC for families with more than two children to help them cover their higher living costs.

But unless policymakers act, these provisions will expire at the end of 2017, causing millions of low-income working families to lose all or part of their CTC and EITC.  More than 16 million people, including almost 8 million children, would be pushed into — or deeper into — poverty.

The affected families work in a diverse range of jobs, from nurses to custodians, as this table shows.

If the provisions expire:

  • Not one penny of the $14,500 in earnings of a full-time, minimum-wage worker would count toward the CTC. The earnings needed to qualify for even a tiny CTC would jump from $3,000 to $14,700.  The earnings needed to qualify for the full CTC would rise from $16,330 to more than $28,000 for a married couple with two children.  A family with two children earning $20,000 would see its CTC cut from $2,000 to $795.
  • Many married couples would face higher marriage penalties and cuts to their EITC. Currently, to reduce marriage penalties, the income level at which the EITC begins to phase out is set $5,000 higher for married couples than for single filers.  After 2017, it would only be $3,000 higher than for single parents, which would shrink the EITC for many low-income married filers and increase the marriage penalty for many two-earner families.
  • Larger families would face a cut in their EITC. After 2017, the maximum EITC for families with more than two children would fall by over $700, to the level of the maximum EITC for families with two children. 


The next post in this series will highlight the need to strengthen the EITC for the only group the federal tax system taxes into poverty: childless workers.


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