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Weekly Round-Up: December 21, 2012 | Tax Credits for Working Families

Tax Credits for Working Families

Weekly Round-Up: December 21, 2012

December 21st, 2012

Here are some highlights from this week’s news on family tax credit issues. Remember – you can also track news coverage throughout the week by visiting our RSS feed, where you can filter news by a specific credit and/or state.

  • Fiscal cliff negotiations continued this week, but a final deal still has yet to be made. A proposal put forth Monday by President Obama would make permanent all improvements made to the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and the Child and Dependent Care Tax Credit (CDCTC), including those made under the American Recovery and Reinvestment Act (ARRA) of 2009. Speaker Boehner announced that the House would vote on a counteroffer he called “Plan B” to extend Bush-era tax cuts for everyone making up to $1 million, but allow the EITC and CTC improvements made under ARRA to expire. This counteroffer did not have sufficient support in the House, however, and the Speaker cancelled the scheduled vote. (The Washington Post 12, The Huffington Post 1, 2, The Center on Budget and Policy Priorities, Politico, The Tax Policy Center, Salon, National Women’s Law Center, Fire Dog Lake, The New Republic)

  • President Obama’s most recent offer also included a proposal to move from the current Consumer Price Index (CPI) to a “chained CPI,” which has the potential to both help and harm our nation’s working families. A chained CPI attempts to account for how people react to higher prices by shifting their purchases from one area of spending to another. Since the inflation adjustment applies to the maximum value of the EITC, and the chained CPI produces a lower rate of inflation than the current CPI, it could potentially reduce the value of the credit over time. On the other hand, the income floor at which working families can begin to qualify for at least a small CTC would increase more slowly with a chained CPI, and more working families would benefit from the credit. (Tax Credits for Working Families, The Washington Post)

  • As the fiscal cliff draws nearer, the media continued to take a closer look at key benefits for working families that are set to expire this year. They include: improvements made to the CTC, which was doubled from $500 to $1,000 and expanded to allow families to count earned income less than $13,350 and receive at least a small portion of the credit; a larger EITC for families with three or more children and a higher income level at which the EITC begins to phase out for married couples; and an increased credit rate of the CDCTC for some working parents as well as expanded eligible expenses for all families receiving the CDCTC. If Congress allows the EITC, CTC, and CDCTC to revert back to their pre-2001 form, nearly three-quarters of all families with children will see their taxes increase or net rebates decline by an average of $1,200, and this tax hike would be in addition to the broad tax increases that would impact nearly all working families. (CBS News, The Washington Post, NPR 1,2, The Tax Policy Center, Wisconsin Budget Project)

  • A team of family scholars recently released a report, “The President’s Marriage Agenda for the Forgotten Sixty Percent,” that recommended tripling the federal CTC as a way to shore up the economic foundations of family life and help tackle the decline in marriage among what they called “Middle America” – the nearly 60 percent of Americans who have completed high school, but do not have a four-year college degree. (The University of Virginia)

  • This week we were also reminded of an important group that has been largely ignored throughout fiscal cliff negotiations: children. If Congress fails to avert the fiscal cliff, important anti-poverty improvements to the EITC and CTC that benefit children will automatically expire. But some of the “solutions” proposed to avoid the fiscal cliff would also harm kids. (The Baltimore Sun, Wisconsin Budget Project, KGUN TV)

  • Last week, the Kentucky tax reform commission recommended creating a state EITC at 15 percent of the federal credit, as one of dozens of changes to the state tax code. But a bumpy road may lie ahead for EITC advocates in Kentucky, as the commission also recommended raising $659 million in new revenue, with some members of the legislature saying the chances of passing anything that requires a tax increase are remote. (The Courier-Journal)

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