Iowans would stand to lose much under a proposal this week in the U.S. House of Representatives. Citizens for Tax Justice offered a striking analysis last week highlighting the impact of the 2009 improvements in the refundable tax credits for low-income working families in Iowa.
Simply put, the House proposal would undo the good work of 2009 and increase tax inequities, while a Senate-passed bill would keep the good stuff.
One of the 2009 improvements is an expansion of the Earned Income Tax Credit (EITC), an issue we have covered extensively at IPP and the Iowa Fiscal Partnership.
Any attempts to weaken the EITC at either the state or federal level will harm low- to moderate-income working families in our state. More than 1 out of every 7 federal tax filers in Iowa claims the EITC (about 15 percent). But under H.R. 8, the tax proposal being offered by the House leadership, the EITC improvements from 2009 would be lost.
H.R. 8 also would fail to extend the improvements made in the Child Tax Credit (CTC) in 2009, and in the American Opportunity Tax Credit for higher education expenses.
It is impossible to find balance in the approach of H.R. 8, which would end these provisions above for 13 million working families with 26 million children, while extending tax cuts for 2.7 million high-income earners.
The state numbers from CTJ (full report available here):
- 86,321 Iowa families with 190,553 kids would lose $62.5 million ($724 per family), if 2009 rules on EITC and the Per-Child Tax Credit are not extended;
- 17,503 Iowa families with 28,179 kids would lose $32 million if the Per-Child Tax Credit earnings threshold does not remain at $3,000, compared to $13,300 as proposed by H.R. 8.
- 59,159 Iowa families with 139,806 kids would lose $30.5 million if the two 2009 expansions of the EITC — larger credit for families with three or more children, and reducing the so-called “marriage penalty” — are not extended in 2013.
These “Making Work Pay” provisions of the tax code are almost exclusively of help to working families earning $50,000 or less at a time of stagnant wages and a difficult job market in which the Iowa economy is shifting toward lower-wage jobs.
To address our nation’s serious deficit and debt issues, a balanced approach should do nothing to increase poverty or income inequality. The Senate bill passed last week would keep the EITC and CTC improvements from 2009, and follows that principle. The bill that has emerged in the House does not.
Posted by Mike Owen, Assistant Director