The Taxing Challenge of Lifting Americans Out of Poverty

Our Jewish values encourage us to advocate for systems that can lift people out of poverty. Jewish history also provides us with an example for helping the needy. During Talmudic times, much of tzedakah (justice) was done though tax-financed, community-run programs that helped those in needed, paralleling the entitlement security that we fight for and continue to fight for today. Through the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), we can help provide for individuals in need through the tax system, a structure already in place. We need to ensure that this benefit does not just exist, but that the benefits will lift families out of poverty.

The EITC is a federal credit that is available to low and moderate income workers. It encourages work, offsets federal income and payroll taxes and ultimately increases family income. These programs are some of the country’s most effective anti-poverty tools – in 2012, the EITC lifted 6.5 million people, including 3.2 million children, out of poverty. The CTC is a credit that helps working families balance the costs of raising their children. The value of the credit is worth up to $1,000 per eligible child.

These tax credits promote work and keep people working by allowing them to keep what they earn and helping them pay for the basics — studies show families use the credits for critical expenses like making car repairs so they can get to work, child care or clothing and other essentials for their children.

The credits also have powerful impacts on children and families. Children in families that get boosts from the EITC and CTC show improvements in health and in school performanceEITC expansions from the 1990s were the most important reason why employment rose among single mothers with kids in that decade, more than welfare reform or than the strong economy.

EITC is also a powerful economic stimulus. For every $1 that goes to working families, the EITC generates $1.50 to $2.00 in economic activity.

The critical improvements made a few years ago to the EITC and the CTC expire in the near future, at the end of 2017. Congress has a chance this year to save key provisions of pro-work tax credits that help millions of hard-working families make ends meet.  The provisions include EITC “marriage-penalty” relief, a larger EITC for families who are raising more than two children, and a lower CTC earnings exclusion that expands the credit for millions of working families and results in fewer working-poor families being completely shut out of the credit. An improvement to the CTC that was geared towards helping working poor and near-poor families will also expire soon.

More than 50 million Americans, including 25 million children, will lose part or all of their Earned Income Tax Credit (EITC) or Child Tax Credit (CTC) if these provisions are not preserved.  Without them, it will be harder for millions of Americans to pay for things that keep them working, such as child care and transportation. There are potential efforts to extend the EITC and make the benefits better able to help more low income workers and ultimately make steps to alleviate poverty. The Senate Finance Committee recently held a hearing on these provisions and it is crucial that we remind them of the benefits that these have in efforts to lift them out of poverty. If Congress lets key provisions of these pro-work tax credits expire at the end of 2017, millions of working families with children will lose part or all of their EITC or CTC, pushing them into, or deeper into, poverty.

As Congress considers business tax proposals this year, it cannot leave behind the millions of working families who depend on these pro-work tax credits.

Check out the RAC’s economic justice page to learn more.


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Melanie Fineman

About Melanie Fineman

Melanie Fineman is a 2014-2015 Eisendrath Legislative Assistant at the RAC. She graduated from Brown University in 2014 and is originally from Newton, Massachusetts, where she is a member of Temple Shalom of Newton.

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