As expected, Senate Minority Leader Mitch McConnell (R-KY) has introduced a bill that would permanently extend all the Bush-era tax cuts.
He’s vowed to block the President’s alternative, which would extend only those that benefit the “middle class,” i.e., individuals earning less than $200,000 and married couples with incomes below $250,000.
The debate has understandably focused on the benefits high-income filers would reap, what would happen if they expired and how much they’d add to the deficit.
A partner in a big accounting firm has crunched some numbers for a hypothetical millionaire in New York City. If we flip them from how much more this fellow would pay if the Bush tax cuts expire to what he’d gain under the McConnell bill, we see that he’d have at least $46,130 more next year — and, barring serious financial mishaps, every year thereafter. Enough to keep him in new BMWs for the rest of his life and then some.
But what about workers at the bottom of the income scale? Seems that McConnell has overlooked them — or simply doesn’t care. Because his bill would wipe out expansions in the Child Tax Credit and the Earned Income Tax Credit that were part of the economic recovery act.
The National Women’s Law Center forecasts the results. Here’s what its brief says, with some fleshing out of my own.
Child Tax Credit. The earned income threshold for claiming the partially-refundable Child Tax Credit would rise from $3,000 to $12,750. As in the past, the threshold would then be annually adjusted to rise with the rate of inflation.
This would not only make the credit unavailable for very low-income families. It would reduce the amount of the credit for numerous still-qualifying families. NWLC says that 12.9 million taxpayers would lose a total of $8.4 billion — all but 2% of them in the bottom two-fifths of the income scale.
The Center on Budget and Policy Priorities has also analyzed the impacts of a return to the 2001 version of the tax credit. Based on what were then current Census data, it figured that families with about 18.1 million children would either lose the whole credit or see it significantly reduced.
A family with one full-time minimum wage worker and two children would immediately lose nearly $1,500 — more than a month of wages. Some 600,000 children would fall into poverty.
Earned Income Tax Credit. The fully-refundable Earned Income Tax Credit would no longer provide any additional amount for workers with more than two children. At the same time, the so-called marriage penalty would return to its pre-2009 level. This means that the credit for a married couple would begin to phase out at close to $2,000 less than it does now.
NWLC says that 11.7 million taxpayers — 91% of them in the bottom two-fifths of the income scale — would lose nearly $3.2 billion.
Impacts on Single Mothers. According to NLWC, more than 30% of single mothers would no longer get any benefit from these tax credits. The new Census figures give us some perspective on what this would mean.
In 2009, more than 4.4 million households headed by women lived below the poverty threshold. For a mother with two children, the threshold was just $17,285. But a great many of these woman-headed households had incomes way below the applicable threshold. The average gap between their incomes and this threshold was $9,218.
A shocking 54.3% of children in woman-headed households lived below the poverty threshold. At least some of their mothers — or other women they were living with — gained cash benefits from the Child Tax Credit and/or the EITC.
Clearly, the McConnell bill would make their hardships even worse.
But would it be okay if the tax credit provisions were fixed? Not by me. Surely we have better things to do with $1 trillion than help the wealthiest 2% or so of Americans gain a greater share of the nation’s income.
But if we’re going to have all the tax cuts extended, even temporarily, let’s make sure we’re not financing the purchase of new BMWs at the expense of low-income workers.