Federal Policy Brief Urges Congress to Expand Tax Credits for Working Families
December 12, 2019Print
By Juan Tirado
According to a new policy brief by Prosperity Now, legislation that would expand the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) would boost the incomes of eight million Black households and nine million Latin American households — reducing Black and Latin American poverty rates by 18% and 20% respectively.
The brief mentions that the EITC and CTC can help advance racial equity, have been proven to positively influence children in families that receive them, and can help them build financial stability. Together, these tax credits lifted as many as ten million people out of poverty in 2019, including over five million children. Because of this, tax credits like the EITC are considered our nation’s most effective anti-poverty tool.
While these tax credits are powerful tools, how accessible they are can determine how effective they can be, which is why programs like Volunteer Income Tax Assistance (VITA) are important to their success. Prosperity Now states that paid tax preparation is expensive and tax preparers often do not meet competency standards which can lead to inaccuracies or predatory behavior. VITA provides free tax preparation to lower-income households as a safer and more accessible alternative to paid tax preparation. Because of this, the brief suggests that the program’s federal funding be increased to $30 million from $18 million.
Despite the success of these tax credits, there are still improvements to be made. Prosperity Now included a set of recommendations aimed at making the credits more effective. The brief presents “The Working Families Tax Relief Act” as one of the ways policymakers could improve both credits simultaneously. This bill would increase the eligibility range for the EITC from 25-64 to 19-67, make the CTC fully refundable and establish a new Young Child Tax Credit (YCTC) for households with children under six, allow households to receive the CTC and YCTC in monthly installments, and draw a $500 advance payment on their EITC. This legislation would also allow Puerto Rican families to apply for the CTC under the same eligibility criteria as the rest of the US and double their current EITC. In addition, it would allow the IRS to regulate paid tax preparers to reduce unscrupulous behavior and inaccurate tax returns.