Tax Breaks for Working Families Face Dire Cuts in President’s Proposed Budget

By Esther Turcios

As Americans focus attention on the proposed cuts and changes to our health care system, less attention has been given to other changes to our tax system that will hit working families hard. 

As two of the best mechanisms to lift individuals and families out of poverty, the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) are facing large cuts and changes under the president’s proposed budget.

The federal EITC and CTC are refundable tax credits that support low- to moderate-income individuals and families. In 2014, 377,000 Colorado households benefited from the federal EITC, and in 2015, the state EITC went into effect for the first time since 2001.

Throughout the years these programs have supplemented the wages of many low-wage workers across the nation. According to the Center on Budget and Policy Priorities, in 2015, these programs helped lift a total of 9.3 million people out of poverty, 4.9 million of who were children. The extra support has allowed many individuals and families to pay for things such as home repairs or vehicle maintenance, while it also helps to pay for educational opportunities, ultimately increasing people’s employability and earning power.

Unfortunately, the president’s proposed budget includes a $40 billion reduction to the Earned Income and Child Tax Credits over the next decade, as reported by the Center on Budget and Policy Priorities. This is in addition to the president’s proposed cuts to SNAP and TANF and in addition to the House-passed American Health Care Act to repeal the Affordable Care Act, which also supports working families across the country.

Under the proposed changes to the child care and earned income credits, in order for taxpayers to claim these tax credits, all adults in the household would be required to provide a Social Security number (SSN) that is valid for work. Under current law, people who don’t have SSNs that are valid for work can claim the CTC and its refundable portion as long as they have an Individual Taxpayer Identification Number, and families can claim the EITC if one adult has a Social Security number, but not every adult in the household must have one.

So, what exactly does this mean? According to the president’s “2018 Major Savings and Reforms” document, in order to claim the EITC, the CTC, taxpayers, their spouses, and all qualifying children (child, stepchild, foster child, sibling or step-sibling or grandchild) must have Social Security numbers that are valid for work. This will effectively exclude millions of undocumented individuals and families who file taxes using their Individual Taxpayer Identification Number. These are folks who work, pay sales taxes and property taxes, and contribute to our economy but who don’t get to reap the same benefits other taxpayers do. This also leaves approximately 5 million children of undocumented parents, the vast majority of these children who are U.S. citizens, without CTC benefits as found by the Center for Law and Social Policy.

Research shows that unlike other programs intended to assist low- and moderate-income communities, the EITC and CTC are better in the long run at lifting people out of poverty and reducing poverty rates than programs such as SNAP and TANF. Clearly, the Earned Income Tax Credit and Child Tax Credit are programs that are crucial for both low- and moderate-income individuals, families and our economy.

This change, and many other changes included in the president’s budget are harmful to Colorado communities, especially those with undocumented populations.