from the Jewish Council for Public Affairs (JCPA):
This time of year we hear a lot of rhetoric and debate about taxes from politicians and pundits. One topic missing from this debate, though, is a discussion of the tax credit programs that greatly benefit low-income families, mainly the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). These two refundable tax credits have helped millions of hard-working families stay out of poverty and weather the still-recovering economy. Yet at the end of the year, both tax credits will expire if Congress does not take action. The EITC and CTC are not your run-of-the-mill tax relief. These credits are some of our country’s most effective anti-poverty tools. Below you will find information on EITC and CTC and why these programs are a lifeline for so many families.
Earned Income Tax Credit: The Earned Income Tax Credit (EITC) is a federal tax credit for low-and moderate-income working people. It is designed to encourage and reward work, as well as offset federal payroll and income taxes. According to the Center on Budget and Policy Priorities (CBPP), “In 2012, working families with children that have annual incomes below about $36,900 to $50,300 (depending on marital status and the number of dependent children) may be eligible for the federal EITC. Also, working poor people without children that have incomes below about $13,900 ($19,200 for a married couple) can receive a very small EITC.” In 2009 (the most recent year where data is available), around 27 million working families and individuals received EITC. The majority of EITC recipients only get the tax credit for one or two years before moving onto higher income levels. EITC provides a step up for working families and helps them pay for necessities. Research shows that most EITC recipients use the money to repair homes, pay for mortgages, medicine, and groceries, and sometimes gain additional education and training to boost their employability and earning power. In 2011, EITC kept 5.7 million people out of poverty, including 3.1 million children. The EITC reduces poverty by supplementing the income of workers with low wages and earnings.
Child Tax Credit: The Child Tax Credit (CTC) helps working families offset the cost of raising children. It is worth up to $1,000 a child (17 years of age and under), and when combined with the EITC, it provides a particularly powerful anti-poverty tool. The CBPP states, “Taxpayers eligible for the credit subtract it from the total amount of federal income taxes they would otherwise owe. For example, if a couple with two qualifying children would owe $4,600 in taxes without the credit, they would owe $2,600 in taxes with it, because the credit would reduce their tax bill by $1,000 for each child.” In 2010, the CTC prevented approximately 2.6 million people from falling into poverty, including about 1.4 million children.
Allowing the EITC and CTC, along with improvements to the programs made in recent years, to expire would have a serious effects on low- and moderate-income families:
• 8.9 million families, including 16.4 million children, would be harmed if earnings below $13,000 are no longer counted toward the tax credit.
• 3.7 million families, including 5.8 million children, would lose the Child Tax Credit entirely.
• 6.5 million families, including 16 million children, would be hurt by the expiration of the EITC improvements. Congress must not allow these important programs to expire. These credits are some of our country’s effective anti-poverty tools.
Below are two additional resources you may find helpful:
• Bread for the World’s Q&A on Tax Credits for Low-Income Families.
• National Women’s Law Center will be holding a webinar on October 23rd to discuss the EITC and CTC and how local organizations can get information on these tax credits to families in need.