Where Tax Cuts & Fairness Begin
Most news-media attention is settling on how S.3393 would affect federal income tax rate reductions that otherwise expire in December (allowing rates to rise only for the wealthiest 2 percent of households). Yet the bill would retain key improvements in the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) that are scheduled to end in five months, too.
These credits are particularly significant policy tools because they target vital assistance specifically to low- and middle-income, working families – those who often work the hardest but have the least to show for it. Also scheduled to expire is the American Opportunity Tax Credit (AOTC), which has proven instrumental in helping low- and moderate-income students to better-afford higher education.
Any detailed discussion of “tax cuts” and “tax fairness” should begin with the need to keep these credits sound and avoid pushing millions of kids and families into poverty. This will be the central focus of our advocacy efforts during Congress’ recess period (Aug. 6-Sept. 7) when lawmakers head home from Washington; we hope you’ll help with this effort.
NCTC’s advocacy efforts will only grow in importance throughout the fall, because summertime Congressional action is expected to fall far short of resolving tax-cut or tax reform deliberations – particularly as election-year rhetoric heats up.
While the Senate probably has the votes to pass S.3393, the House is projected to ignore it or vote it down. Meanwhile, House leaders have said they’ll pass their own legislation to extend all the expiring income tax rates, including those in the top brackets that help only the most well-to-do households. (It’s important to remember those wealthiest of taxpayers already would benefit from the retention of low rates for the bottom brackets.)
That forthcoming House bill’s full details aren’t available yet. But while the legislation could keep the maximum Child Tax Credit from being cut in half as scheduled, the bill isn’t expected to maintain other critical, CTC improvements of the 2009 American Recovery and Reinvestment Act, let alone that Act’s EITC augmentations and AOTC creation.
Struggling, working families can’t afford to lose the targeted help of those credits. And our nation simply can’t afford to hang onto tax-rate cuts for the minority of households that need them least.
A balanced approach is required to steady our economy and tackle the crucial goal of deficit reduction. That balance requires raising some new revenues in addition to making some spending cuts; a budget-cuts-only framework would unduly harm education, health care and income supports for working families.
The real action on tax rates and fairness isn’t expected to happen until after November elections. That makes the coming weeks and months a critical time to speak-up on behalf of working families – laying the groundwork for good policy decisions that shore-up, rather than weaken, the households at the core of our economy.
By Sean Noble, Director of Public Policy & Research