A Proposal to Fix the Federal Tax Code for Working Families

A new proposal introduced last week by Senator Sherrod Brown (D-OH) would help fix the tax code and provide relief for low-paid workers as they support themselves and their families by putting money back in their pockets for basic necessities like home repairs, car maintenance, or in some cases, additional education or training to get a better, higher-paying job.

The bill, aptly named the Working Families Tax Relief Act, would substantially expand both the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), boosting the incomes and economic security of 46 million households nationwide, including 1,049,000 million households in New Jersey. The EITC and CTC are widely recognized as some of the most impactful policies that help working people with low-paid jobs make ends meet, reduce poverty, and improve children’s opportunities and outcomes later in life.

Specifically, the bill would:

  • Increase the EITC for families with children by roughly 25 percent
  • Substantially increase the EITC for workers not raising children and lower the eligibility age to 19
  • Make the full $2,000 CTC available to all low- and moderate-income families
  • Create a new Young Child Tax Credit that would provide families with children under 6 years old an extra $1,000 per child (for a total of $3,000 per child)
  • Make the CTC equally accessible to families in Puerto Rico and expand Puerto Rico’s EITC

Addressing the upside down tax code and 2017 federal tax cuts

Working families have seen their incomes stagnate for decades — through no fault of their own — without much relief from the federal government. Instead, recent tax law changes have exacerbated inequality and skewed the tax code to further benefit already wealthy individuals and corporations. This is exemplified by the deeply flawed 2017 federal tax cuts, which delivered large cuts to the wealthy and profitable corporations, yet failed to strengthen the EITC and left more than 11 million children in low-income working families with either no CTC increase or a token increase of $75 or less. The Working Families Tax Relief Act  would begin to fix the upside down nature of the tax code in three important ways. It would strengthen the EITC for working people not raising children, ensure that millions of poor children aren’t left out of the Child Tax Credit, and target additional income support to low-income families with very young children.

Boosting the incomes of working-class people across racial and ethnic backgrounds

Working-class households of all races — especially those with working-age people without a college degree — have enjoyed only small income gains in recent decades. Many of these working people have low-paid jobs that do not allow them to meet their most basics needs. The problem of low wages is further compounded in communities of color, where many people face barriers like housing discrimination. Under the Working Families Tax Relief Act, a single mom of two earning $20,000 a year would get a $3,700 annual boost. A married couple with two young kids making $45,000 a year would get a $3,500 boost. This is real relief for families that need it the most — and it would have a ripple effect throughout the broader economy.

Lasting benefits for millions of children and their families

The Working Families Tax Relief Act recognizes that the best investment a government can make is in its children. Refundable tax credits like the CTC and EITC have many direct and indirect benefits for kids, as parents who have higher incomes from tax credits tend to get more prenatal care, experience less maternal stress, and have healthier babies. Research also indicates that children receiving tax credits do better in school and are more likely to attend college. This improves kids’ economic prospects well into adulthood through more years of schooling, higher skills, and thus higher earnings. Kids whose families receive tax credits are also likelier to avoid the early onset of illnesses associated with child poverty.

It’s time to fix the federal tax code for working families

Many of America’s low-income working families are struggling to stay afloat as decades of stagnant wages have not kept pace with rising costs of living. This has resulted in far too many parents with low-paying jobs struggling to provide for themselves and their families. The Working Families Tax Relief Ac would begin to fix the federal tax code to better serve working people and help those struggling to keep their heads above water and give their children a good start in life.