Democrats are increasingly betting to make permanent some tax credits: first they brought to the table the Child Tax Credit (CTC) and its extension through 2025, and now they are pursuing the Earned Income Tax Credit, which they also want to become a stable feature for the coming fiscal years.
According to experts, this is a flexible and highly beneficial credit for low- and middle-income families. The main eligibility requirement for families to qualify is that they have earned income, and the more dependents they have, the more money they receive.
However, so far it has had a notable exception: it excludes from eligibility adults who do not raise their children in the home where they live, that is, those who live apart from them.
Currently, this credit bases its value on a percentage of each applicant’s income and, in addition, is refundable. Previously, workers who did not have children received little benefit from the Earned Income Tax Credit, but after the American Rescue Plan was enacted, the benefit for single filers was increased up to $1,502, triple what they had received in prior years.
But that’s not all; the age for eligibility was also expanded, so that, as a consequence of the Covid-19 pandemic, it applied to people aged 19 to 65. The problem is that all these enhancements expire this year, since the American Rescue Plan stipulated that these changes would be available only for the year 2021.
And that is precisely where the Democrats’ plan enters, as they seek to extend these already enacted and accepted changes on a permanent basis.
“The March American Rescue Plan took a bold step to fix that flaw. This correction is not only a major advancement for adults who are not raising children at home, but it also has real implications for racial equity,” Kris Cox, deputy director of federal tax policy at the Center on Budget and Policy Priorities, told CNBC.
However, for the Joint Committee on Taxation, making this measure permanent would cost many billions of dollars: about $135 billion over the next ten years.
According to estimates from the Institute on Tax Policy and Economic Policy, if the Earned Income Tax Credit were made permanent, it would provide $12.4 billion to the families that apply.
–Earned Income Tax Credit: what it is, who qualifies, and why it can change each year
