What’s at Stake for Working Families in the Upcoming Tax Debate
“We’re about to begin—or continue—a very important debate,” said Jason Furman, deputy assistant to the president for economic policy and deputy director of the National Economic Council, during a keynote address at the Center for American Progress Action Fund last week on how the tax code has been used to reward and incent working families.
Furman was referring to the fact that when Congress returns from recess next week they will commence the biggest tax debate since the Bush tax cuts were passed in 2001 and 2003. The debate thus far has centered on whether or not the tax breaks for the wealthiest Americans should be allowed to expire. But those with the most at stake in this debate are not upper-income Americans—they are middle-class and low-wage workers for whom refundable tax credits, such as the Earned Income Tax Credit, or EITC, make postsecondary education, homeownership, and savings possible.
Furman argued in his address that presidents on both sides of the aisle have helped make the tax code friendlier to working families over the last 25 years. Enduring credits such as the EITC, the Child Tax Credit or CTC, and additional provisions for expansion and refundability have defied the political logic that “programs for the poor are poor programs,” according to Furman. He cited two of the key reasons for this. One, the credits are part of the tax code, and few opponents would argue to increase taxes. And two, the credits are related to work, a characteristic both parties can support.
A panel of federal, community, and personally affected experts and advocates followed Furman’s remarks and discussed what’s at stake for middle-class and low-wage workers in the upcoming tax debate. Michael Linden, Associate Director for Tax and Budget Policy at the Center for American Progress Action Fund, highlighted the long-term importance of the EITC and the CTC in driving economic mobility, calling them both a “floor and a ladder” out of poverty. If Congress doesn’t reauthorize the changes made to the EITC and the CTC in last year’s Recovery Act by the end of the year, millions of low-income families will be affected, including 600,000 children who would fall below the poverty line.
Meg Newman, who coordinates a site offering free income tax preparation to low-income clients in one of Washington, D.C.’s poorest communities as part of the IRS’s Volunteer Income Tax Assistance program, said she sees the impact of the EITC and CTC changes firsthand. The expanded EITC and CTC have become powerful tools for her clients, with more families claiming the CTC and the average value of an EITC refund increasing substantially. Newman noted that the EITC helps her clients keep their jobs, pay down debt, cover basic expenses, and helps them avoid foreclosure or eviction.
But no one can appreciate the EITC and the CTC more than panelist Barbara Izquierdo, a working mother of two children who said, “The EITC changed my life.” For Barbara, these credits not only help her pay her bills and begin saving for college, but they also give her the independence, determination, and hope she needs to give her children a better life.
Middle-class and low-wage workers have much to lose in the looming tax debate. As policymakers return from recess and make critical decisions on the extension of these expanded tax credits they should think of Barbara and the millions like her, and make the tax code work for working families.
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