Federal Tax Package Important Win for New Jersey’s Working Families

Federal Tax Package Important Win for New Jersey’s Working Families
Deal Saves $256 Million in Crucial Tax Credits a Year

About 219,000 New Jersey families will keep a key income boost that helps them go to work and make ends meet under a new bipartisan agreement in Congress that saves provisions of two critical tax credits, the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).

Under the agreement announced late Tuesday night, expiring provisions of the EITC and CTC would be made permanent along with certain tax breaks for businesses. Without this agreement, hundreds of thousands of children and adults would be pushed into – or deeper into – poverty when these key pieces of the EITC and CTC expire in 2017.

“By making these critical improvements to the EITC and CTC permanent, this deal ensures that New Jersey working families will not get left behind as Congress completes its work this year,” New Jersey Policy Perspective (NJPP) Deputy Director Jon Whiten said. “It’s critical that our representatives on both sides of the aisle now move quickly to pass this legislation before Congress heads home for the holidays.”

The EITC and CTC allow working families to keep more of what they earn to pay for the essentials like school supplies for their kids or car repairs to help them get to work. Each year, they help over half a million New Jerseyans who are working but not paid enough to get by. While Congress has taken the first step in reaching an agreement, the legislation will need to pass both the House of Representatives and the Senate and be signed by the President before it becomes law.

As NJPP noted in a Brief earlier this month, the potential loss to New Jersey’s working families from these federal credit expirations, at $256 million a year, would have dwarfed the gain of approximately $120 million a year that they will see from the state EITC boost signed into law this summer by Gov. Christie.

While the agreement is a positive step for millions of working families across the country, it fails to close a glaring hole in the EITC that leaves behind millions of childless workers each year. These individuals are the lone group of Americans taxed into poverty.

“It makes no sense that young people who are working to support themselves are ineligible for any credit, much less that you have to have a child before you can get a significant benefit,” said Serena Rice, Executive Director of the Anti-Poverty Network of New Jersey. “Expanding the EITC to childless workers would help about 350,000 New Jerseyans. There is strong bipartisan support for fixing this problem, and Congress should address it next year.”