Child Poverty

Working Families Tax Relief Act

April 12, 2019 | National

This week, Senators Sherrod Brown (D-OH), Michael Bennet (D-CO), Richard Durbin (D-IL) and Ron Wyden(D-OR), introduced the Working Families Tax Relief Act, a plan to boost two crucial tax programs that would cut child poverty in the United States by 28 percent according to a study from the Center on Budget and Policy Priorities.

Here’s how it works: The value of the Earned Income Tax Credit (EITC), which increases take-home pay for low-wage workers, would rise by about 25 percent for families with children.  It also includes a long overdue EITC raise for those workers not raising children in their home but some of whom may be benefitting them otherwise.

The Child Tax Credit (CTC), which helps working parents pay the high cost of child-rearing, would rise substantially for poor children and young children. Under current law, millions of poor children can’t benefit from the CTC because of income eligibility restrictions and limits on the value of the credit for families facing no federal tax liability. This plan would do away with those restrictions and provide a credit of $2,000 for every child at or above age 6 and a new, increased credit of $3,000 for children under 6, regardless of family income (though the credit would begin to phase out for married couples earning more than $200,000 per year and individuals earning more than $150,000).

For the first time in decades, low-income workers would see a substantial pay raise. Working class wages have stagnated over the last four decades—rising by only 5 percent since 1979 after accounting for inflation. Together, these improvements to the EITC and CTC would raise incomes for working families with children by about $2,000 per year and lift 3 million children out of poverty. An estimated 46 million low and moderate income households would benefit. An earlier post provides more detail on how these credits help children and boost family incomes.

These changes also serve as an important corrective to the 2017 tax overhaul that exploded inequality by raising the after-tax income for the richest one percent by over $60,000 per year while raising the after-tax income of the lowest fifth of Americans by about $70. The Brown-Bennet-Durbin-Wyden bill would make the tax code better serve working families.

Right now, 46 of the 47 Senate Democrats and none of the 53 Senate Republicans have signed on to this bill to raise wages for families with children and cut child poverty by almost 30 percent. We urge the remaining Senators to join this effort to help our most vulnerable children.