Sen. Schumer and Rep. Torres: Delivering for America’s Working Families
By Senator Charles E. Schumer and Representative Ritchie Torres
As we confront the greatest economic downturn since the Great Depression, millions of American workers and families are experiencing immense hardship. More than 18 million Americans are relying on unemployment insurance benefits, 14 million renters are behind on payments, and 29 million adults live in households that are struggling to afford food. It is also clear that the crisis has exacerbated longstanding structural inequities in our economy, as Black and Latino households have been disproportionately affected by job loss and poverty resulting from this COVID-19 emergency.
We can and must do better for America’s working families.
Earlier this month, President Joe Biden put forward a bold proposal – the American Rescue Plan – to deliver additional relief to struggling households nationwide. Notably, his plan includes a historic temporary expansion of two of the U.S. government’s most powerful and effective anti-poverty tools that put money directly into the pockets of families who need it most: the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC).
The Earned Income Tax Credit is a federal tax credit that provides direct economic support for low and moderate-income households by reducing the income taxes they owe dollar for dollar. It is fully “refundable,” which means if the credit amount is more than what a worker owes in taxes, that worker can receive the remaining value as a refund. Last year, around 25 million eligible workers and families benefitted from the EITC, with an average credit of $2,461.
Working families can also benefit from the Child Tax Credit. The CTC is worth up to a total of $2,000 for each eligible child under the age of 17. It is estimated that 48 million households will claim the CTC for 2020.
While the EITC and CTC combined have lifted more American families out of poverty than any other federal government program aside from Social Security, there are flaws with the credits that leave some of the most vulnerable members of our population behind.
Childless workers receive a meager Earned Income Tax Credit, of less than $300 on average, compared to their counterparts with children. Partly as a result, nearly 6 million of these workers are taxed into or deeper into poverty. Children remain the poorest age group in the country, with nearly one in six living in poverty. But, around 27 million children – including nearly half of all Black and Latino children – are living in households that are not eligible to receive the full value of the Child Tax Credit because their parents either don’t have enough income, or their parents have no income at all.
In this time of great economic insecurity, Congress must act boldly to increase and strengthen these programs to lift millions of workers and children out of poverty.
How the American Rescue Plan strengthens these credits.
President Biden’s American Rescue Plan would significantly expand these tax credits and close the gaps for the lowest income households. According to the Center on Poverty and Social Policy at Columbia University, the proposed EITC and CTC expansion – combined with increased nutrition assistance, direct cash payments, and enhanced unemployment benefits for jobless workers – could cut child poverty in half.
Specifically, this plan would make the Child Tax Credit fully refundable, ensuring this resource is available to families with very low or no income. The proposal would also increase the credit amount to $3,000 per child, and provide a higher $3,600 amount for children under 6. And, it would allow 17-year-old children, who are typically ineligible for the credit, to benefit for this year. It is estimated that these changes would increase the average CTC by $2,260 for families with children, enhancing benefits for almost 90 percent of these households. This expansion would promote greater racial equity by reducing poverty among children of color, reducing the poverty rate for Black children in half and for Latino children by at least 41 percent. Overall, this strengthened CTC would lift nearly 10 million children above or closer to the poverty line.
To put these changes into context, under current law a single mother – with a 7-year-old son – who works as a part-time home care aide earning $9,000 annually would receive a Child Tax Credit of $975. However, under President Biden’s proposal, she would receive $3,000 for her child, an increase of $2,025 for her family.
Similarly, a married couple where one spouse works as a hospital sanitation worker and earns $21,000 per year while the other spouse stays home to care for their 2-year-old and 8-year-old daughters now receives a Child Tax Credit of $2,775. With the expanded credit, they would see an increase of $3,825.
A single father, who cares for a 4-year-old daughter but was unable to work last year due to underlying health conditions, would see no CTC since he does not meet the current income threshold to benefit. However, under this new plan, he would receive $3,600.
President Biden has also proposed to expand the Earned Income Tax Credit to ensure that lower-income individuals – including essential workers – have the financial resources necessary to weather this crisis. This plan would raise the maximum EITC for childless workers from around $540 to nearly $1,500, almost tripling the credit amount, and increase the income limit for the credit from $16,000 to about $21,000. It would also expand the age range for the EITC to include older childless workers over the age of 64, who are currently excluded from the credit.
This EITC expansion would provide additional relief to more than 17 million workers without children, including home health aides, delivery workers, janitors and building cleaners, cashiers, and millions of others in essential but lower-paid jobs during this pandemic. It would also allow 4 million Latino, 3 million Black, and 746,000 Asian American workers who are not raising children at home to benefit from the credit. Crucially, fixing this flaw in the EITC would ensure that frontline workers have the economic assistance they need and deserve.
Expanding these credits has been a Democratic priority.
This significant expansion of the Earned Income Tax Credit and Child Tax Credit is something Democrats have been fighting tooth and nail to secure for years. In 2015, we successfully pushed to ensure these vital anti-poverty programs were permanently enshrined into the U.S. tax code and have been pushing to further strengthen the programs to benefit a greater number of Americans ever since.
President Biden’s proposal reflects many key provisions to expand the EITC and CTC that are included in Senator Brown’s Working Families Tax Relief Act and Senator Bennet’s American Family Act. These important bills have been introduced in prior Congresses and receive broad support from Democrats in both chambers. However, then-Majority Leader McConnell never provided the opportunity to vote on this critical tax relief for workers and families. A temporary expansion of these tax credits was also included in the HEROES Act, the comprehensive relief bill which passed the House last year, but was never considered in the Senate despite the urging of Democrats.
Now, with a new Democratic Senate Majority and Administration, one of our top priorities is correcting the economic inequities that have plagued our society. Strengthening the EITC and CTC will be a historic, critical first step in creating a fairer tax code and a more just economy
Senator Charles E. Schumer is Senate Majority Leader.
Congressman Ritchie Torres represents New York’s 15th District.