Tax reform and federal budget proposal season is in full swing
The recent releases of House Ways and Means Committee Chair Dave Camp’s tax reform discussion draft and President Obama’s 2015 budget proposal are out for review, and the Community VITA field will have plenty of reason to keep our eyes on both. Not the least of which are the two plans’ proposals to reform the Earned Income Tax Credit.
Earlier this week, President Obama released his plan to substantially expand the EITC for single workers and non-custodial parents – a much needed and welcome plan for a population of taxpayers often neglected by the supports for low- and moderate-income households in the tax code. Among the key features we’re excited about, the proposal would double the maximum credit for these taxpayers, increase the maximum income to claim the credit, and expand the age-eligibility range for claiming the EITC.
Also coming from the White House this week, the President’s 2015 budget plan was released, which included a proposed 50 percent increase in funding for the VITA grant over current spending to $18 million. This increase is that same proposal as the President included in his 2014 budget and the Senate’s 2014 budget proposal, both of which were unfortunately unsuccessful last year. NCTC will continue to push for increasing the VITA grant as much as possible through the budget and appropriations process, as well as our continued efforts to seek passage of the VITA Act.
A very different proposal from the President’s plan, Chairman Camp’s proposal for the EITC is certainly the farthest from the current credit – restructuring it as an offset to a taxpayer’s payroll taxes. This dramatic change could have very serious consequences for working families. As the Center on Budget and Policy Priorities highlights in their analysis, a full-time working mother with two kids earning the minimum wage could stand to lose about $2,000 once the plan is fully implemented. Despite this tax reform discussion draft also including a significant increase in the Child Tax Credit, families could lose substantial amounts of support from the revised EITC which may outweigh any benefits from CTC enhancements.
One positive note to the House GOP discussion draft we’re following, the plan as laid out would adopt a consolidation plan for the various higher education tax credits currently in the tax code. Following the model of the Student and Family Tax Simplification Act introduced by Reps. Diane Black of Tennessee and Danny Davis of Illinois, the discussion draft would consolidate higher education credits into a permanent American Opportunity Tax Credit (AOTC) – eliminating the Hope and Lifetime Learning Credits in the process. This permanent credit would generally follow the same structure as the current AOTC with an increase in its refundable portion to $1,500.
As the discussions over all of these proposals move forward, NCTC will continue to ensure the voices of the Community VITA field and low- and moderate-income taxpayers are heard.