As Congress returns from recess, the Center for American Progress Action Fund hosted as especially timely event on August 31 titled “Making the Tax Code Work for Working Families.” Speakers discussed the emerging tax debate, the past and future of family-friendly tax credits, and how the tax code can be reformed to help working families.
Featured speakers included Jason Furman, Deputy Assistant to the President for Economic Policy; Meg Newman, a Volunteer Income Tax Assistance (VITA) Center coordinator; and Michael Linden, Associate Director for Tax and Budget Policy at the Center for American Progress Action Fund.
Jason Furman recounted the history and current status of tax credits that help working families, and emphasized that in the current debate, the Administration supports maintaining and expanding tax cuts targeted toward middle and low-income families. These tax credits include:
- The Earned Income Tax Credit (EITC);
- The Child Care Tax Credit;
- The Making Work Pay Tax Credit, and
- The American Opportunity Tax Credit.
In the same spirit of anti-poverty tax reform in which the EITC was expanded in the 1980s, these credits were expanded most recently in the American Recovery and Reinvestment Act (ARRA) of 2009. Mainly, the reforms introduced with ARRA accomplished the following:
- The Making Work Pay Tax Credit was introduced;
- The marriage penalty was reduced for low-income families;
- EITC was expanded for households with 3 or more children;
- The income threshold to receive the Child Care Tax Credit was lowered, making it available to more low-income families.
As noted during the discussion, President Obama and his economic team are in favor of making the expansions to EITC and the Child Care Tax Credit permanent. The economic and social reasons to do so are persuasive, as Michael Linden noted:
- 18 million children benefit from tax cuts like the Child Care Tax Credit;
- These credits reward work, and help to increase labor participation rates and employment;
- Low-income families will spend their tax refunds on their children, which will help boost economic growth and consumer spending. Tax cuts for the wealthiest, it was argued, will not have as much positive impact on the economy as a whole.
Corporate Voices believes that tax credits like these are critical to help working families, and particularly low-income families, maintain financial stability. That is why we have published guides and toolkits to help employers make their employees aware of the tax benefits that may be available to them. For large and small employers of hourly workers, these tools are a great way to distribute tax benefit information to your employees, while engendering trust, goodwill, and loyalty within your workforce.
Our most recent toolkit, the 2009 Employer Guide, provides companies with practical tools to help employees take advantage of:
- The Earned Income and Child Care Tax Credits;
- The State Children’s Health Insurance Program;
- The Supplemental Nutrition Assistance Program, and
- VITA Centers that offer free tax preparation services for working families.
Employers may also be able to take advantage of the Disconnected Youth Tax Credit, also introduced with the American Recovery and Reinvestment Act. Companies may be eligible to save up to $2,400 per employee for hiring “disconnected youth,” while at the same time tapping into a new talent pool and providing young adults with onramps to the labor force.
The debate about the future of tax reform will continue and be defined by mid-term elections in November. We will have to see how family-friendly tax credits will be affected. As long as they exist, however, Corporate Voices invites businesses to use our resources to help make these credits available for working families.
Readers can also get a sense of the thinking of the President’s Economic Recovery Advisory Board on these issues, within the context of tax reform and simplification, by reading their newly issued Task Force Report.