Spring is the season for rebirth—and for taxes. As we round out another tax season, there isn’t a better time for Congress to work to reform the tax code. Our current system is unfair, unnecessarily complex, and has helped contribute to vast and growing deficits.
Over the past several years tax policies have failed the vast majority of taxpayers in order to benefit the few. The tax code now provides significant preferences for income derived from accumulated wealth, while simultaneously laying a greater share of the tax burden on the middle class. Recent tax changes give an annual average cut of over $100,000 to Americans with incomes over $1 million, while middle-income families with earnings between $26,000 and $45,000 receive about $650. Low-income families receive even less. These tax changes have exacerbated existing inequalities and added trillions to the national debt while doing little to help low-income families.
We deserve a tax system that reduces our massive deficits, strengthens the middle class while honoring their hard work, and opens the door for Americans of all income levels to succeed. A comprehensive tax reform package must reverse the trends leading the country into financial ruin and craft a tax system that is fairer and simpler than our current system.
A reformed tax plan would improve the Earned Income Tax Credit and expand the number of families eligible to receive the federal child tax credit. It’s an achievable goal for Congress, and making it a reality would bring immediate relief to millions of workers and their families.
Congress should improve the EITC by reducing the marriage penalty, which leads to over half of low-income married couples having lower benefits. It should also triple the small EITC for childless workers in order to increase employment among disadvantaged young adults. This change would benefit about four million people, yielding an average tax savings of about $750 annually.
The Child Tax Credit is another chance for Congress to aid families. Currently, the CTC is limited for low-income families who have smaller federal income tax liabilities. Yet many low-income families still have significant payroll tax liabilities—over 95 percent of Americans in the bottom 20 percent of the population pay more in payroll tax than in federal income tax. Congress should make the CTC available to more low-income families by making the credit refundable to all families with payroll tax liability.
Congress can further benefit working families by creating an additional credit for families with three or more children. The EITC currently increases for one and two children, but not for three or more. Congress’ implementation of this change would benefit about 3 million low-income families.
Once members of Congress are finished filing their own taxes this spring, they should take a look at how they can improve the system as a whole. They can start with short-term tax reforms like improving the EITC and expanding the child tax credit, which will give much-needed economic relief to millions of American workers and families.
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