CHN: Improvements to Working Family Tax Credits Made Permanent in Tax Cut Package

In a huge win for advocates, key provisions of tax credits for low-income working families were made permanent in a tax package that passed the House (318-109) on Thursday and the Senate on Friday (in the Senate, it was combined with the FY16 omnibus spending bill before passage. See the related article in this Human Needs Report for more information on the omnibus). The tax package, which also emerged in the pre-dawn hours of Wednesday last week when the omnibus was released, addressed more than 50 mostly-corporate tax breaks and will cost $622 billion over 10 years. Some of these corporate breaks were made permanent, while others were extended for two or five years.
By making permanent the 2009 improvements to the Earned Income Tax Credit, Child Tax Credit, and American Opportunity Tax Credit, more poor and near-poor working families and college students will be reached. For example, a mother working full time at the minimum wage can now be assured that her children will benefit from a $1,725 Child Tax Credit – with no risk that this much-needed help will disappear. As the Center on Budget and Policy Priorities notes, up to 50 million Americans will benefit from making the provisions permanent, including up to 25 million children.

Many advocates decried spending hundreds of billions of dollars on corporate giveaways without paying for them, especially in a time when additional revenue is so hard to come by and so needed. For example, the package makes permanent the “active financing exception,” which makes it easier for certain corporations to shelter income overseas, and will cost $78 billion over 10 years. While it is true that the tax cuts extended or made permanent have been repeatedly extended, sometimes for decades, Congress’ failure to pay for them does contribute to the deficit. Some of the same members of Congress who pushed for these breaks may call for decreased spending in other areas, including domestic programs, to reduce the deficit.

Other advocates, including the National Immigration Law Center, were disappointed that some immigrant taxpayers will face restrictions in receiving low-income tax credits through rules that do not apply to other taxpayers. They also noted that some immigrants seeking to pay taxes are likely to face unjust roadblocks that will contribute to deeper poverty for their children, while Congress failed to place responsible controls over tax preparers whose actions contribute substantially to error rates.

Despite these serious drawbacks, many advocates believed this tax package was the best opportunity to make permanent the tax credits for low-income working families. Had it failed to pass, Congress would have likely extended the business tax breaks for an additional two years, leaving low-income people in danger of losing the tax credits that help them when the improvements to the EITC and CTC expire, which had been set for 2017.

tax policy