At a recent community event in Philadelphia, we talked with Will Gonzalez of Ceiba Philadelphia about what the Earned Income Tax Credit and the Child Tax Credit mean to the families in the city.
Last week, NCLR traveled to Las Vegas for a town hall where local elected officials, as well as business and advocacy groups in the area, joined a discussion on the need to protect refundable tax credits for working families.
— NCLR_Econ (@NCLR_Econ) October 23, 2015
With Congress set to renew tax credits for businesses this fall, panelists, which included Nevada State Assemblyman Nelson Araujo; Margarita Rebollal, Executive Director of Community Services of Nevada; and Rafael Collazo, Director of Political Campaigns at NCLR, shared personal stories about how the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) offer vital financial relief for low- and moderate-income families throughout the Las Vegas area.
In 2009, Congress expanded the EITC and CTC, which are only available to working people, in order to reach lower-income earners. The expansion had an important impact for Nevadans. Approximately 500,000 households in Nevada received the credits in 2013, helping lift more than 100,000 households out of poverty. The EITC also added more than $550 million into Nevada’s economy in 2012. If Congress doesn’t act to make the expansions permanent this fall, more than 440,000 Nevadans could lose some or all of their working-family tax credits, pushing more than 100,000 of Nevada’s children deeper into poverty.
“If lawmakers are willing to help Nevada’s businesses, then they should also support Nevada’s hardworking families. After all, our local businesses rely on consumers in order to thrive,” said Collazo.
— NCLR_Econ (@NCLR_Econ) October 23, 2015
The event generated a lively discussion among attendees, who also had the chance to register to vote with Mi Familia Vota, and sign on to a letter to Nevada’s Congressional representatives asking that they support working families by protecting these vital tax credits. A number of local officials also came out to support the campaign and hear from constituents on the issue, including Nevada State Assemblywoman Olivia Diaz and Councilman Issac Barron.
— NCLR_Econ (@NCLR_Econ) October 23, 2015
By Stephanie Román, Economic Policy Analyst, NCLR
The numbers tell a clear story about the importance of tax credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) in Florida: in 2013, more than 3.5 million households received the EITC or the CTC.
These tax credits keep 600,000 Floridians, including 311,000 children, out of poverty. They are also good for the economy—in 2012 the EITC added $5.1 billion to Florida’s economy.
Yet the numbers alone don’t capture the richer, more personal stories of those low-income working families who benefit from these credits. One such story comes from Yubely Cinero of Miami.
Yubely is a single mother, working two jobs to provide the best life she can to her eight-year-old daughter.
She is just barely getting by.
Yubely’s two jobs—as a housekeeper and as a child care provider—are exhausting work, yet the hardest thing for her is not having time to spend with her daughter.
“As a single mother who has to work so much because the pay is so low, the worst thing is not being able to give my daughter the quality of life I would like to; I can’t spend time with her because I have to work,” said Yubely.
For Yubely and so many others, saving is nearly impossible when trying to raise a child on a minimum-wage salary as a single mother.
“I live day-to-day here; there is no way to save. Without this money, there is no way to buy school supplies and uniforms for my daughter,” said Yubely.
She has come to depend on her CTC refund as the source of extra cash that helps her buy clothes for her daughter, make rent, and if there’s a little extra left, to take her daughter to a museum. If Congress decides to turn its back on working families and fails to make permanent the 2009 improvements to the EITC and CTC, millions of families like Yubely’s will lose one of their few opportunities to save and make much-needed purchases.
It doesn’t take much to see the huge impact these tax credits make in the lives of hardworking Americans like Yubely. Congressional inaction would also mean that more than half a million of Florida’s kids would be pushed into poverty.
For Yubely, and others in her position, this just doesn’t make sense.
“It sincerely doesn’t make sense that they wouldn’t do something to save these credits,” said Yubely. “The problem with this is that poverty will increase—the poor will get poorer and the rich will get richer. For them it’s nothing, but for us, it’s a lot.”
Yubely is right. These tax credits make a difference in the lives of millions and we have to make sure Congress does the right thing for hardworking families—like Yubely and her daughter—who are struggling to get by.
The Mayor of Miami, Tomás Regalado, is another person who believes in the importance of the CTC and EITC. He spoke honestly about how he’s seen the tax credits work in Miami. To him as to many others, the question about whether or not Congress should act is clear: “saving the credits is the right thing to do.”
Visit our new page to learn more about the vital importance of tax credits in your state.
Why saving tax credits is so important to working families
By Stephanie Román, Economy Policy Analyst, NCLR
How often do you think about tax credits outside of the day you prepare your taxes or get your tax refund?
It’s true that a lot of us don’t think about tax credits often, but we should be thinking about them now because they might disappear if we don’t act to save critical improvements.
During the recession, lots of families were struggling, so both parties in Congress agreed to help working families by expanding the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) so even very low-income working families could get a partial credit. These tax credits help families with the cost of raising children and reward families who don’t earn very much. If these credits are worth more than what someone owes in taxes, they can receive the difference as a tax refund.
— NCLR_Econ (@NCLR_Econ) September 25, 2015
I was recently in Miami at the South Florida Hispanic Chamber of Commerce’s event Viva Miami to talk to real people about why they might lose part or all of their CTC and EITC refund. I didn’t expect people to be interested in this topic, but they proved me wrong. These families were interested in talking about these tax credits because they make a real difference in their lives. While there, I met Karen, a single mother of three. Karen told me it would be extremely harmful to her family if the improvements to the CTC expire. She works hard to support her kids yet is still living paycheck to paycheck. Though the recession has officially ended, research shows that many working families like Karen’s are not earning enough to cover their basic expenses. Latinos are hit especially hard—more than 40 percent bring home poverty-level wages despite their huge contributions to the U.S. economy. The CTC refund averages $1,000 and helps families fill the gap and provide funds that can be used for savings, to make a needed purchase, or go toward rent and mortgage payments.
The Mayor of Miami, Tomás Regalado, who also participated in this event, is another person who believes in the effectiveness of the CTC and EITC. He spoke compellingly about how he’s seen the tax credits work in Miami. To him as to many others, “saving the credits is an important and human issue.” With so many working families struggling to get by in a tough economic recovery, it just doesn’t make much sense for Congress to allow these vital enhancements of the EITC and CTC expire. As I learned from talking to families in Miami, the stakes are high. If these critical tax credits expire, Latinos would be especially harmed because they make up a disproportionate share of low-wage workers who qualify for the EITC and CTC. In 2013, Latinos made up 17 percent of the U.S. population but 28 percent of the working poor.
— NCLR_Econ (@NCLR_Econ) September 26, 2015
This fall, as Congress considers renewing some business tax credits that are expiring, it should not forget about the millions of families like Karen’s who depend on these pro-work tax credits. If Congress doesn’t act to save these credits, five million Latino families will lose an average of $1,000 each and 50 million Americans, including 25 million children, will lose part or all of their EITC or CTC. These tax credits make a difference in the lives of millions and we have to make sure Congress does the right thing for hardworking families struggling to get by.
(Cross-posted from the Citizens for Tax Justice Blog)
Donald Trump’s recently released framework for immigration reform includes misleading statements about “illegal immigrants” claiming refundable tax credits. Trump claims that “illegal immigrants” received $4.2 billion in “free” tax credits in 2011 and proposes to pay for part of his immigration proposal by accepting the Treasury Inspector General for Tax Administration (TIGTA)’s “recommendation” to eliminate tax credit payments to these individuals. It’s hard to know where to start in deconstructing the inaccuracies in Trump’s statement.
First, the use of the word “free” is highly misleading, as undocumented immigrants do pay a significant amount in local, state, and federal taxes. An analysis by the Institute on Taxation and Economic Policy (ITEP) estimated that in 2012, undocumented immigrants paid $11.8 billion in state and local taxes (including about $7 billion in sales and excise taxes, $3.6 billion in property taxes, and $1.1 billion in income taxes). On top of this, the Social Security Administration’s Office of the Chief Actuary estimated that in 2010, unauthorized workers (who may be undocumented or in the country legally but without permission to work) paid $12 billion in Social Security payroll taxes net of benefits received. Since most unauthorized workers are not eligible for Social Security benefits, this group only received approximately $1 billion in benefits for the $13 billion paid in.
Second, the $4.2 billion figure that Trump references is from a 2011 TIGTA report that actually states that families with an unauthorized worker received $4.2 billion in 2009 (not 2011) through the refundable portion of the Child Tax Credit (known as the Additional Child Tax Credit). While this may sound the same on the surface, there are a few things that should be noted. As the report explains, these credits were claimed by taxpayers using an Individual Taxpayer Identification Number (ITIN), which the IRS issues to individuals not eligible for a Social Security Number. ITINs are issued without regard to immigration status to people not authorized to work in the United States, so this group includes not just undocumented immigrants but also individuals who have immigrated legally but aren’t legally able to work.
Taxpayers using an ITIN are prohibited from receiving the Earned Income Tax Credit (EITC) but are allowed to claim the Child Tax Credit (CTC). Worth up to $1,000 per qualifying child, the CTC is intended to offset the costs of raising children. Families who owe less in taxes than their eligible Child Tax Credit amount can receive the difference through the Additional Child Tax Credit, which is paid out with their tax refund. Since the CTC is intended primarily to benefit children, it makes sense that it is the children’s immigration status, not the parents’, that qualifies a family to receive the credit, and a qualifying child can be a citizen, a U.S. national, or a resident alien. And although some portion of the $4.2 billion in Additional Child Tax Credits could be going to families with undocumented parents, nearly 80 percent of the children of undocumented immigrants are U.S. citizens.
It is also worth noting that the refundable tax credits like the EITC and CTC have immense benefits for the children in the families that receive them. There is a growing body of research showing that these credits improve educational and health outcomes for children and result in them working hard and having higher earnings as adults.
Third, while Trump says that his plan would “accept the recommendation” of TIGTA to eliminate tax credit payments to illegal immigrants, the 2012 TIGTA report that he references makes no such recommendation. In actuality, the report recommends that the IRS implement procedures to reduce the number of fraudulent ITIN applications that it approves. TIGTA’s main concern here is that people are using fraudulent documents to obtain an ITIN and using it to file fraudulent tax returns (e.g. claiming tax refunds for non-existent persons), not the use of ITINs by undocumented immigrants.
Finally, if the concern is the $4.2 billion revenue loss, Trump should look to comprehensive immigration reform that allows a path to citizenship for undocumented immigrants, which would actually increase revenues at the federal, state, and local levels. The Congressional Budget Office (CBO) estimated that the 2013 Senate comprehensive immigration reform bill would have decreased the deficit by $197 billion over ten years, as newly legal immigrants would pay $459 billion in additional taxes, while the increased government expenditures for benefits would only increase by $262 billion. Additionally, ITEP estimated that granting citizenship to all undocumented immigrants would raise more than $2.2 billion annually in state and local revenues. These revenue increases would occur because more immigrants would then be paying taxes on their income and because citizenship is likely to boost wages and therefore increase income, sales and property taxes. Trump might want to consider these benefits instead of spending all his time planning for that wall.
For more on Trump’s tax proposals, click here.