A Bipartisan Plan to Revitalize the Working Class through the EITC and CDCTC
By Marie Wilken
A new report from a bipartisan group of scholars recommends expanding the Child and Dependent Care Tax Credit (CDCTC) and Earned Income Tax Credit (EITC) as part of a broader strategy to encourage work and increase prosperity for lower-income Americans.
The group – convened by Opportunity America and cosponsored by the American Enterprise Institute (AEI) and the Brookings Institution – came together in the months after the 2016 election to discuss the causes of and possible solutions to working-class economic distress. What resulted is a set of policy recommendations that the group hopes will foster agreement between Democrats and Republicans in Congress.
“Work, Skills, Community: Restoring Opportunity for the Working Class” suggests making the CDCTC refundable to help make child care more affordable for working families who do not earn enough to owe income taxes. To pay for the expansion, the report recommends capping program eligibility at $80,000 in income per family per year.
The report also recommends increasing the EITC for workers without dependent children and calculating the size of the credit based on individual earnings, rather than household earnings, which would eliminate the current “penalty” that occurs after two single workers who claim the credit get married and receive a smaller EITC or lose eligibility entirely as a result of combining incomes.
The estimated cost for this kind of EITC expansion would be $20 to $25 billion per year, according to an analysis by the American Enterprise Institute’s Open Source Policy Center. The report proposes three possible ways to raise additional revenue to cover the expansion: limit tax exemptions available to wealthier households, expand the number of families that pay estate taxes or raise minimum taxes for corporations that rely on tax havens. Ideally, the report notes, the EITC reform would also eliminate the marriage penalty for households with children, but this could be complicated and too expensive.
Beyond expanding tax credits for low-wage workers, the report offers numerous other policy recommendations aimed at protecting jobs, boosting incomes, increasing access to education and skill-building opportunities, and fostering family and community. The report concludes with a call to action for lawmakers, employers and working-class Americans to “step up, fleshing out our proposals and acting on them” to help build a better future for low-wage workers.
Read the full report, “Work, Skills, Community: Restoring Opportunity for the Working Class,” here.