Federal EITC Modernization bill introduced

Today, Rep. Bonnie Watson Coleman of New Jersey introduced H.R.6873, the EITC Modernization Act of 2018. This legislation incorporates many of the modernizations that have been explored by Economic Security Project and other organizations, and is an exciting development in this policy space.

The bill is written to be an addition either to the current federal EITC or a much-expanded EITC like that envisioned in the GAIN Act, the legislation proposed by Rep. Ro Khanna (D-CA) and Sen. Sherrod Brown (D-OH). Together with the GAIN Act, it approximates pretty closely what a first version of a Working Families Tax Credit could look like at the federal level.

“We know that the economy isn’t working for people, we know that wages are stagnant, and we know that it’s getting harder and harder for average families to make ends meet. We also know that the EITC works to close those gaps, so expanding eligibility to those seeking better paychecks through higher education or working the equivalent of a part-time job to care for a family member just makes sense,” said Rep. Watson Coleman in a statement on the bill’s introduction. “These folks work long hours and multiple jobs to have enough income to cover day to day expenses. If we can cut taxes for billionaires and corporations, we should be chomping at the bit to help people striving for the middle class.”

"The working and middle-class in our country are long overdue for tax reform that benefits them, rather than the status quo that keeps funneling wealth to the very top," said Chris Hughes, Co-chair of the Economic Security Project. "Modernizing the tax code to provide monthly tax credits to hard-working Americans will offer a much-needed influx of cash to stabilize and strengthen the financial lives of millions of families."

The EITC Modernization Act of 2018 would:

  • Expand eligibility to include family caregivers and students, including those with low or no income, setting a minimum baseline EITC payment for students and caregivers of $1,200 a year;

  • Create an option for recipients to receive their benefits monthly, in an electronic payment, to help cover day-to-day expenses as they arise;

  • Give a larger payment at tax time for recipients opting for a monthly credit (equal to 4 months credit in the first year a monthly credit is chosen, 2 months in any subsequent year when receiving a monthly credit);

  • Lower the age of eligibility to 18;

  • Fund the Volunteer Income Tax Assistance (VITA) Program, which offers free tax help to people who generally make $54,000 or less, to ensure working Americans can get the help that they need in claiming the EITC; and

  • Provide a rapid credit for parents of new children: recipients already getting a monthly credit who give birth to or adopt a new baby can file for an increase in the monthly payment right away rather than waiting until tax time.

Caregivers, who are primarily women, provided roughly $3.2 trillion in unpaid care in the United States in 2012. A recent study by the National Alliance for Caregiving and AARP found nearly 40 million Americans are providing unpaid care, with another five million caregivers expected to be added by 2020. 61 percent of these individuals report making changes such as cutting back on their paid working hours, changing jobs, stopping work entirely, taking a leave of absence, or other related changes because of their caregiving role, contributing to higher rates of financial instability. Concurrently, students seeking higher-paid career paths often struggle with the real-time costs and future debt of the education they need to achieve their dreams.

“This bill begins to recognize that the overlooked and often thankless work of caregiving is essential to our society. Until we have more robust paid leave policy, like the FAMILY Act, valuing their contributions through the EITC is critical,” Watson Coleman added.

“The evidence on the EITC is clear: when we provide cash to low- and middle-income families, poverty declines. But today’s EITC largely leaves many people out,” said Elaine Maag, senior research associate at the Urban Institute. “Workers without custodial children have to be at least 25 to qualify, and then only qualify for a very small credit over a very small income range. This proposal would expand the EITC both by increasing the credit for these workers and lowering the eligibility age to 18. Low-income students would also be included in the credit, which could provide significant financial relief as they attend college. Changes such as these would make the credit more fair and lift additional people out of poverty.”

"The EITC Modernization Act makes significant progress in compensating for the valuable work of taking care of family members,” said Sarita Gupta, co-executive director of Jobs With Justice and co-director of Caring Across Generations. “In our country, over 40 million family caregivers provide uncompensated care valued at over $470 billion annually. Family caregivers, just like me, spend close to $7,000, on average, in out-of-pocket expenses a year. The financial and time burden of caregiving especially hits Black, white and Latina women who provide care to their loved ones hard. We applaud Representative Watson Coleman for initiating a tax benefit that would help provide a measure of relief to working people, instead of just the wealthiest and most well-connected."

Original Cosponsors of the EITC Modernization Act of 2018 include: Reps. Ro Khanna (D-CA), Tim Ryan (D-OH), Raúl Grijalva (D-AZ), Eleanor Holmes Norton (D-DC), Darren Soto (D-FL), and Yvette Clarke (D-NY), Sheila Jackson Lee (D-TX), Karen Bass (D-CA), Nanette Diaz Barragan (D-CA), Al Lawson (D-FL), Pramila Jayapal (D-WA), Bennie Thompson (D-MS), and Jamie Raskin (D-MD).