Untangling the House Tax Proposals: Part 1
by Amelia Kegan
On Wednesday, the House of Representatives voted on two competing tax proposals: H.R. 8 and H.R. 15. News accounts reported that H.R. 15 would extend tax cuts for those earning up to $250,000 and H.R. 8 would extend tax cuts for everyone. But that is not the whole story.
H.R. 8 Would Not Extend Tax Cuts for Everyone
H.R. 8 failed to extend critical tax credits for low-income working families—the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). These are the salient details about the bill:
- H.R. 8 eliminates EITC marriage-penalty relief.
- H.R. 8 prevents families from earning even $1 of the CTC until they make at least $13,000.
- H.R. 8 reduces EITC benefits for families with three or more kids.
Congress has made significant improvements to EITC and CTC, so H.R. 8 would harm millions of low-income working families in 2013 by allowing the improvements to expire. These will be some of the consequences if the bill passes:
- 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 nearly 16 million children, would be hurt by the expiration of the EITC improvements.
Economists keep talking about the country’s unsustainable long-term deficits and debt. That is a problem Congress has to grapple with.
Congress must also grapple with the fact that more than one in five children in the United States live in families struggling to put food on the table and that the U.S. child poverty rate is over 25 percent. Congress must grapple with the fact that 925 million people around the world are chronically hungry.
H.R. 8 does not appear to provide a solution to either the deficit problem or the poverty problem. In fact, it appears to exacerbate both. Most economists will tell you it will take a combination of spending cuts and additional tax revenue to lower our deficit. But H.R. 8 does not ask for additional taxes from anyone—except low-income working families.
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. They reward work and promote economic mobility. The EITC and CTC kept over 9 million people, including 4.9 million children, out of poverty in 2010. The 2009 improvements alone kept 1.6 million people out of poverty. And a majority of EITC recipients only get the tax credit for one or two years before moving onto higher income levels.
We need not choose between fiscal sustainability and ending hunger. We can and must address them simultaneously. It is a matter of choices. That’s all budget and tax policy amounts to, choices and priorities communicated through numbers.
If your representative opposed H.R. 8 or supported H.R. 15, thank him or her. If your representative voted for H.R. 8, call the office and share your views about Bread's Faithful Tax Policy and the need to continue low-income tax credits like the EITC and CTC.
Stay tuned for a second post which corrects more misinformation about recent tax votes.
- Read about Bread's mini campaign to preserve tax credits for low-income Americans.
Amelia Kegan is a senior policy analyst at Bread for the World.
Photo: Heather Rude-Turner's son, Isaac, enjoys fresh fruit. Heather depends on EITC to help support her family
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