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3 Million Veteran or Active-Duty Households Would Benefit From Working Families Tax Relief Act

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:

  • 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. It would also extend the current age range of those who can claim the credit from 25 to 64 years old to 19 to 67 years old.
  • Make the Child Tax Credit fully refundable so children in lower-income households, including those with little or no income, could benefit fully from it. The proposal would also create a larger, fully refundable Young Child Tax Credit, boosting the Child Tax Credit to $3,000 per child under age 6, up from its current $2,000 per child.

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.

Veteran or Active-Duty Households That Would Benefit From Working Families Tax Relief Act, by State
State Number of Households
Total U.S. 3,015,300
Alabama 55,600
Alaska 17,600
Arizona 73,500
Arkansas 35,300
California 263,700
Colorado 64,400
Connecticut 18,500
Delaware 8,600
Dist. of Columbia 3,600
Florida 209,300
Georgia 128,100
Hawaii 34,000
Idaho 20,900
Illinois 86,100
Indiana 59,800
Iowa 25,300
Kansas 38,400
Kentucky 51,000
Louisiana 51,900
Maine 14,100
Maryland 52,400
Massachusetts 32,200
Michigan 76,100
Minnesota 41,500
Mississippi 34,000
Missouri 69,500
Montana 14,700
Nebraska 18,700
Nevada 30,700
New Hampshire 11,200
New Jersey 32,800
New Mexico 24,300
New York 89,600
North Carolina 146,838
North Dakota 9,648
Ohio 106,541
Oklahoma 53,177
Oregon 39,976
Pennsylvania 93,300
Rhode Island 6,700
South Carolina 69,400
South Dakota 10,200
Tennessee 77,400
Texas 280,300
Utah 21,900
Vermont 4,300
Virginia 144,200
Washington 92,500
West Virginia 20,200
Wisconsin 41,800
Wyoming 9,500

Source: CBPP estimates based on 2015-2017 American Community Survey data and March 2018 Current Population Survey data.

Chuck Marr
Vicepresidente de Política Tributaria Federal