Congress has a lot on its plate before it breaks for the holidays. In addition to agreeing on a way to fund the federal government, one of its most important tasks is to forge a compromise on a range of tax credits for businesses and workers. Debates about the tax code are riddled with jargon and technicalities. Too often, compromises start to sound like minor disagreements over a balance sheet. But in fact, the decisions Congress must make during this tax debate will either help stabilize hardworking families or push millions of them into poverty. As Congress tries to cut a deal, they should support the everyday working people who rely on our tax code—especially the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC)—to make ends meet in an economy that isn’t working for many of us.
It’s working people like Joanna who have real stakes in the current debate. Joanna has two children—a 14-year-old daughter and a 5-year-old son. She works full-time as a cashier on the third shift at her local deli. She earns the current minimum wage in New Jersey—$8.38 per hour—which means she makes just over $17,000 annually. To say she struggles to make ends meet is a great understatement.
“I have to pick and choose my battles when it comes to paychecks,” she says. “I sacrifice whatever I may need or want because my children come first.”
Joanna receives the EITC and CTC, both of which are intended to encourage work and offset federal payroll and income taxes for working households.
“It lifts a burden off my back,” Joanna says. “I’m able to catch up on all our bills…I was able to get my children coats for the winter, shoes that will last them for a while, school clothes and underclothes all at once. It’s a lifesaver.”
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Congress must now decide whether to make key parts of the EITC and CTC permanent as part of a broader tax package that primarily benefits corporations. If they let key provisions of these credits expire at the end of 2017, Congress will be cutting Joanna’s family income by over $1,500 per year. That’s income that makes a real difference in the lives of Joanna and her children.
“The thought of [losing income from the tax credits] has been stressing me out,” she says.
Joanna isn’t the only one who is worried. If Congress lets these provisions expire, nearly 50 million Americans, including 25 million children, would face a loss of income. In 2018, 16 million people would either fall into poverty, or fall deeper into poverty. In New Jersey, where Joanna lives, 219,000 families and 435,000 children would be impacted if Congress cuts these credits.
Moreover, these tax credits don’t just mitigate poverty and economic hardship in the short-term—they have tremendous positive effects on children’s long-term health and success. After significant increases in the credits in the 1990s, there was substantial improvement in the health of new born children. Indicators of child wellbeing such as low-weight births and premature births improved, as did indicators for the health of the mothers of these children. Research has also shown that the EITC and CTC improve the educational outcomes for children according to a variety of indicators, including academic test scores. Children from families receiving these tax credits are also more likely to attend college and earn more as adults.
In short, these tax credits are public policies that work—and work very well. Right now, Congress is debating how to extend more than 50 tax credits and incentives. Many of these are costly credits for big corporations. In fact, out of the $400 billion in proposed tax benefits, two-thirds would go to businesses. If Congress considers making these business credits permanent, they must also make key improvements to the EITC and CTC permanent for working people like Joanna.