2013 Opens with Protection of Working Families’ Tax Credits
Among the most significant victories in Congress’ “fiscal cliff” agreement was the protection of key tax credits for working families – the result of strong advocacy efforts.
Several critical but expiring improvements in the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) were extended for five years, helping to shield 13.1 million families from an average loss of about $843 of assistance per household. (Notably, a couple of other important EITC and CTC provisions were made permanent, including the preservation of the maximum, $1,000-per-child CTC amount.)
A similar, five-year extension of the American Opportunity Tax Credit means about 11 million students can hang onto the help they need in affording a college education.
While most news headlines focused on the retention of lowered income-tax rates for low- and middle-income families, these tax-credit measures were particularly critical for targeting help to those households who need it most. And they reflect impressive advocacy efforts by so many of you; thank you for pressing Congress to protect the well-being of struggling taxpayers and their kids.
The legislative agreement also extended vital unemployment insurance benefits. And it permanently “patched” the Alternative Minimum Tax – further keeping taxes from soaring for millions of middle-income households – as well as retaining a package of so-called “tax extender” provisions dealing with such issues as mortgage debt relief. Failure to deal with the AMT and extenders could have seriously delayed tax-filing for millions of Americans this season.
As with any compromise, the news wasn’t exclusively positive. For example:
- Expiration of a payroll tax cut still will hit the wallets of low- and moderate-income Americans – underscoring the importance of the aforementioned tax-credit and tax-rate measures.
- Scheduled, across-the-board budget cuts were not erased or replaced, but simply delayed for two months. That means many in Congress still will be looking to slash spending deeply in the weeks to come – leaving VITA and other crucial education, health and human services still endangered.
Nonetheless, it’s important to pause and note the policy successes this hard-fought agreement represents for low- and moderate-income, working households – just as it will be important to continue championing families’ well-being in the tax-and-budget discussions that await, later this winter and spring.
By Sean Noble, Director, Policy & Research