What’s at Stake for DC If the Expanded EITC and Child Tax Credit Die?

Yesterday, the House passed a bill to extend the Bush tax cuts that’s virtually identical to the Senate Republicans’ recently defeated bill — this after defeating an alternative much like what the Senate passed.

What will happen next is anybody’s guess. What will happen if the Republicans finally prevail on the issue of the refundable Earned Income Tax Credit and Child Tax Credit isn’t — thanks to some great number-crunching by Citizens for Tax Justice.

As I earlier wrote, the Republicans don’t want to extend the tax credits in their current forms, i.e., with expansions originally made by the Recovery Act.

Without them, parents with more than two children wouldn’t get as large an EITC credit as they can now. And married couples would again incur a significant “marriage penalty.”

The refundable Child Tax Credit wouldn’t be available at all for very low-income working families. Refunds would be much smaller for many others because they’re a percent of income above a threshold that would rise from $3,000 to about $13,300 initially — and keep rising as time went on.

CTJ provides state-by-state breakouts for some of the impacts. Here’s what it tells us about the District of Columbia, with some additional observations from me.

In 2013 alone:

  • Nearly 7,940 District families, including an estimated 11,673 children, could no longer get any Child Tax Credit refund.
  • These families, plus those who could still claim the credit would collectively lose $7.6 million — a hit to not only their budgets, but our local economy because there’d be that much less for them to spend.
  • About 8,285 families, including 24,435 children, would lose some portion of their federal EITC.
  • These losses would total $5.3 million.

Families would also lose out because the District’s own EITC is linked to the federal. Taxpayers can get 35% of whatever their federal credit is — and reimbursements if claiming the credit brings the taxes they owe to less than zero.

Rough back-of-the-envelope calculation suggests that total EITC losses could be well over $7.1 million.

In 2010, 1.6 million more people would have fallen below the poverty line if the Recovery Act hadn’t expanded the EITC and Child Tax Credit, according to analyses by the Center on Budget and Policy Priorities.

Hard to believe we wouldn’t have more District families in poverty if Congress extends the credits in their earlier, more restrictive forms.

One Response to What’s at Stake for DC If the Expanded EITC and Child Tax Credit Die?

  1. […] as I noted in an earlier post, the District’s own EITC is linked to the federal, as is also the case for all but one of the […]

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