Senators Included Child Tax Credit and Earned Income Tax Credit Expansions to Lift Millions of Children Out of Poverty and Put Money in the Pockets of Working Families in American Rescue Plan
Washington, D.C. – Today, Colorado U.S. Senator Michael Bennet and U.S. Senators Sherrod Brown (D-Ohio), Cory Booker (D-N.J.), Ron Wyden (D-Ore.), and Raphael Warnock (D-Ga.) led 41 Senate Democrats in a push to build on the success of the American Rescue Plan Act by making critical tax credits for families and struggling workers permanent.
The American Rescue Plan Act was an historic investment in the economic well-being of children, families, and workers. The one-year expansions of the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) will help reward work, support families, and lift millions of children out of poverty. Bennet and his colleagues are now looking to build on this success by urging President Joe Biden to make these critical tax credit expansions permanent in the recovery package he plans to send to Congress.
“The expansions of the Child Tax Credit and the Earned Income Tax Credit in the American Rescue Plan are the most significant investment in America’s families and workers in generations. The one-year expansions will cut child poverty nearly in half and boost incomes for workers without kids. To let these changes expire after only one year would be a disgrace,” said Bennet. “By making these expansions permanent, we can provide long-lasting support for America’s kids and workers, and build an economy that works for everyone, not just the people at the very top."
“Even before the pandemic, hard work wasn’t paying off for millions of workers. Ohioans wanted us to go big and make a real difference in their lives. That’s what these tax credits will do. The EITC and CTC are two of the best tools we have to put money in the pockets of working families and lift millions of children out of poverty,” said Brown. “And we’re not going to stop there. Now, we need to make these expansions permanent to help reward work, reduce poverty, and make life better for millions of Americans.”
“Two weeks ago, President Biden signed into law historic, but temporary, expansions of the Child Tax Credit and Earned Income Tax Credit as a part of the American Rescue Plan,” said Booker. “These expansions are some of most transformative economic policies to come out of Washington in decades, and will not only deliver much needed relief to millions of families and working people across the country, but also take a bold step toward addressing the crisis of poverty. In New Jersey alone, these expanded tax credits will lift 89,000 kids and their families above the poverty line, and put more money in the pockets of 354,000 New Jersey workers struggling to get by. Making this expansion permanent is essential to our long term economic recovery and rebuilding our economy in a way that expands access to opportunity for everyone.”
“Making our historic expansions of the earned income and child tax credits permanent would be one of the most effective thing we could do to build a better future for working families. If you’re a working mom struggling to pay rent and buy groceries, a few hundred dollars per month makes all the difference in the world to your family, and we’re not going to quit until we get this done,” said Wyden.
“With the passage of the American Rescue Plan, lawmakers in Washington have shown we have the aptitude and fortitude to address the scourge of child poverty in Georgia and across our nation. But while the one-year expansion of both the Child Tax Credit and Earned Income Tax Credit is an important first step toward getting more money into the pockets of families and individuals who need it most, Congress can and should eliminate child poverty once and for all,” said Warnock. “We must permanently expand these two tax refund programs, and I’m going to keep working as hard as I can with my colleagues in the Senate to make this happen.”
In addition to Bennet, Brown, Booker, Wyden, and Warnock, the letter was signed by U.S. Senators Ed Markey (D-Mass.), Richard Blumenthal (D-Conn.), Tammy Baldwin (D-Wis.), Ben Cardin (D-Md.), Sheldon Whitehouse (D-R.I.), Richard Durbin (D-Ill.), Chris Van Hollen (D-Md.), Jack Reed (D-R.I.), Elizabeth Warren (D-Mass.), Robert Menendez (D-N.J.), Alex Padilla (D-Calif.), Tammy Duckworth (D-Ill.), Ben Ray Luján (D-N.M.), Kirsten Gillibrand (D-N.Y.), Patty Murray (D-Wash.), Bob Casey (D-Pa.), Mazie Hirono (D-Hawaii), Debbie Stabenow (D-Mich.), Jeff Merkley (D-Ore.), Tina Smith (D-Minn.), Bernie Sanders (I-Vt.), Amy Klobuchar (D-Minn.), Martin Heinrich (D-N.M.), Chris Murphy (D-Conn.), Gary Peters (D-Mich.), Patrick Leahy (D-Vt.), Maria Cantwell (D-Wash.), Tim Kaine (D-Va.), Brian Schatz (D-Hawaii), Dianne Feinstein (D-Calif.), John Hickenlooper (D-Colo.), Chris Coons (D-Del.), Mark Warner (D-Va.), Catherine Cortez Masto (D-Nev.), Jon Ossoff (D-Ga.), and Jacky Rosen (D-Nev.).
The text of the letter is available HERE and below.
Dear President Biden:
We thank you for your strong leadership as our country begins to emerge and recover from the COVID-19 pandemic. The American Rescue Plan you proposed and Congress enacted has put us on a path to defeating the virus and building back better. We should not allow this momentum to fade. As such, any further recovery plans you propose should include some very specific programs made permanent.
A critical component of the American Rescue Plan is the one-year expansion of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). For decades, these tax credits have rewarded work, supported families, and lifted millions out of poverty. But for too long, persistent gaps in the EITC have caused nearly six million adult workers to be taxed into or further into poverty because they qualified for only a small credit, or no credit at all. Gaps in the CTC meant 27 million children – one-third of all children – were not eligible for the full amount of the credit, and some received no credit at all.
Fortunately, the expansions of these credits in the American Rescue Plan temporarily correct these persistent flaws. The expansion of the so-called “childless adult” EITC is expected to boost the incomes of 17 million low-wage working adults – many of whom are on the frontlines of COVID-19 crisis as delivery drivers, home health aides, and grocery store workers. The expansion of the CTC is estimated to cut child poverty nearly in half. The American Rescue Plan is indeed a historic investment in the economic well-being of children, families, and struggling workers – and the EITC and CTC expansions drive that investment.
We must not allow these critical expansions to expire after one year. Doing so would result in a significant spike in child poverty, after we have made historic strides to end it. It would mean that millions of struggling adult workers would once again be taxed into poverty. That is wrong and unacceptable. Reducing child poverty, strengthening the economic security of low-wage workers, and reducing racial income disparities through these two important tax credits must be a core part of the Recovery Plan Congress considers later this year under your leadership.
No recovery will be complete unless our tax code provides a sustained pathway to economic prosperity for working adults and families. Your forthcoming Recovery Plan is the opportunity we have to make the expansions of these credits permanent. To that end, we ask that your Recovery Plan include the following permanent measures, which build on the temporary improvements in the American Rescue Plan:
- Expand the so-called “childless adult” EITC. The American Rescue Plan virtually tripled the maximum credit for eligible workers not raising children in the home.
- Lower the EITC eligibility age from 25 to 19 and eliminate the maximum age. The minimum eligibility age needlessly locked young adult workers out of the benefit of the credit. As workers continue working longer into life, the maximum eligibility age should also be permanently repealed.
- Make the CTC fully refundable. A fully refundable CTC ensures that all low- and moderate-income families receive the full value of the credit, including families living in the deepest poverty who need it most.
- Boost the CTC from $2,000 to $3,000 (and $3,600 for kids ages 0 to 5). A larger CTC provides the stronger financial support families need to make ends meet. The larger Young Child Tax Credit provides additional support for children in their most critical years of development. Together with full refundability, these improvements cut child poverty nearly in half, including cutting poverty among Black children by 52 percent, Hispanic children by more than 45 percent, and children in Tribes by more than 60 percent.
- Distribute the CTC on a monthly basis. The American Rescue Plan provides for periodic distribution of the CTC starting in July 2021. Your Recovery Plan should formalize an optional monthly distribution system and provide the IRS with the resources it needs to successfully administer such an arrangement.
- Ensure strong safeguards to prevent low-income families from repayment. Roughly 3 million children – many of whom are low income – change the adult they live with during the course of a given year. These low-income families should be protected from a surprise tax bill through strong safeguards (a “safe harbor”) to limit repayment. The IRS should provide a straightforward, accessible platform for filers to notify the IRS of changes in family status or income.
- Return to previous law on CTC eligibility. The 2017 tax law newly required children to be issued a Social Security Number in order to qualify for the CTC. Your Recovery Plan should return to pre-2017 tax law policy, allowing children with Social Security Numbers or with Individual Taxpayer Identification Numbers (ITINs) to qualify.
- Continue the earned income lookback option. The American Rescue Plan allows filers to substitute their 2019 income in place of 2021 income, to avoid losing the value of their EITC. This lookback option is a key tool to help workers reduce income volatility and its harmful consequences. Using the previous year’s income to compute EITC benefits is the type of optionality our tax code already affords corporate taxpayers; it should be permanently available to low-paid workers as well.
The American Rescue Plan laid a strong foundation by making these improvements on a one-year basis, providing a critical income boost to workers and families. These improvements are a necessary component of a Recovery Plan that ensures children, families, and struggling workers have the economic security they need. They also make for a fairer and more just tax code. Moving forward, if indeed we are to build back better, these changes must be made permanent to ensure a sustained and equitable recovery for American workers and families.