No, I’m not referring to the budget Congress just passed. Better than a government shutdown, of course — or what we would have had if Congress hadn’t lifted the spending caps. But more a relief from what could have been than a pretty good thing.
Many converted from nominally temporary to permanent will benefit businesses or well-off individuals. But poor and near-poor families will also benefit because the improved Earned Income Tax Credit and Child Tax Credit become as permanent as the rest.
Here, briefly, is what this means as a practical matter — and, also briefly, why the bill isn’t plain good, but probably as good as it could be under the circumstances.
More Spendable Income for Working Families
The Recovery Act made two changes in the EITC that benefit working families. It reduced the so-called marriage penalty, i.e., the lower benefit some married couples receive when both have earned income. And it added a higher benefit for those with three or more children.
The Recovery Act also reduced the minimum wage income required to claim the refundable part of the CTC from what was then $12,500 to $3,000, enabling many more low-income parents to get a modest budget boost at tax time.
All these improvements would have expired in 2017. Some 16.4 million people would have fallen into poverty or deeper poverty — mostly the latter, according to the Center on Budget and Policy Priorities’ latest estimates.
And results would have worsened in future years because the former permanent law linked the threshold for claiming the CTC to consumer price inflation.
Urgent Though Not Expiring at Year’s End
One might think that Congress could have waited to deal with the improvements — as it tends to do with extenders. But excluding them from the package would have made preserving them later much tougher.
Because the more tax breaks made permanent, the greater the chance that the improvements would have hung out there alone. Republicans would then have insisted they be fully paid for, i.e., offset by spending cuts or revenue raisers.
But they wouldn’t go for the latter. So they could have forced a choice between a rollback to the pre-improved tax credits and spending cuts.
This might not have proved the only hurdle. As a recent letter from major advocacy organizations warned, the improvements could “essentially be held hostage for other deleterious policy changes.”
Anyone who’s been reading about the policy riders Republicans tried to hang onto the budget bill has some notion of how supporters of the improvements might find those changes too high a price to pay.
Downside for Some Immigrant Families
To no one’s surprise, the anti-immigrant sentiment among some Republicans infiltrated the tax bill negotiations.
One proposal, resurrected repeatedly since 2012, would have denied the refundable CTC to parents who file tax returns using an ITIN (Individual Taxpayer Identifications Number) — the alternative to a Social Security number that undocumented immigrants, among others must used to comply with their legal obligations.
That would have ended the annual income supplement that helps with the costs of raising more than 5 million children — as many as 4.5 million of them citizens, if that matters, as I think it shouldn’t.
At least two other proposals sought to prevent undocumented immigrants from claiming either one or both of the refundable tax credits. Whether these were only floated or actually put on the table only a fly on the wall could say.
Opponents fended them off. But Republican negotiators apparently felt the need to do something hostile to immigrants — if only to get enough of their colleagues on board when the bill came to a vote.
And their Democratic counterparts apparently felt they had to swallow something to get a deal done — and passed. They knew, after all, as did the Republicans, that right-wingers were insisting on a battery of anti-immigrants riders on the budget bill.
For whatever reasons, the final tax package does several things that will disadvantage some immigrant taxpayers.
One provision will deny those who filed with an ITIN but shortly thereafter got a Social Security number from claiming the EITC benefits they could have claimed before if they’d had it. Another will bar retroactive CTC claims in cases where the credit wasn’t initially claimed due to lack of an ITIN.
Still another will translate into law some recent rules that require about 21 million ITIN filers to get a new number and, at the same time, make the process more difficult.
Even without the anti-immigrant provisions, the bill would be only far better than one that omitted the refundable tax credit improvements.
Progressive advocates and some members of Congress, not only progressives, have proposed further improvements. These will have to wait for another day — and a very different Congress.
Last but not least, the tax cuts alone will cost nearly $629 billion over the next 10 years, according to Joint Committee on Taxation estimates.* And not a penny of the revenue loss is offset. This will surely cramp needed investments.
To say that extensions of nominally temporary tax cuts are never paid for doesn’t make the bill fiscally responsible. This is one reason a majority of House Democrats and six in the Senate voted against it.
But, as CLASP says, “it is highly likely that Congress would have simply extended the business credits without doing anything for working families.”
So to my mind — and not mine only — the bill the President signed represents a major victory for the bipartisan-minded negotiators and for progressive advocates, including grassroots folks who signed petitions, called Congress members and visited them on Capitol Hill — or got in their faces when they were back home.
Something to recall as we head into a new year, with new challenges.
* The total package Congress passed postpones three taxes established by the Affordable Care Act. This makes the cost larger, though by how much we can’t yet know because the delays may or may not become conventional extenders