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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, and low-income families even less. These tax changes have exacerbated existing inequalities and have added trillions to the national debt, while doing little for low-income families.

Expanding the Child Tax Credit and Earned Income Tax Credit is an achievable goal, and would bring immediate relief to millions of workers and their families.

The Child Tax Credit

We can immediately make the Child Tax Credit available to more low-income families by:

  • Making the credit refundable to all families with a payroll tax liability, regardless of the amount they pay in federal taxes.

Low-income families with minimal federal tax liabilities receive only limited help from the Child Tax Credit. Yet many of these 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.

The Earned Income Tax Credit

We can improve the Earned Income Tax Credit by:

  • Reducing the marriage penalty that can cause over half of low-income married couples to have lower benefits.
  • Tripling the small credit for childless workers in order to increase the work incentive for disadvantaged young adults. This change would benefit about four million people, yielding an average tax savings of about $750 annually.
  • Creating an additional credit for families with three or more children. The amount that families receive increases with family size up to two children, but there is no additional credit for families with three or more. Adding additional credits would benefit about three million low income families.

Americans overwhelmingly cited the economy as one of their top motivations in voting during the midterm elections. Americans also believe that we need to reform the tax code:

These short-term tax reforms, combined with a sustainable long-term plan, can bring much-needed economic relief to American workers and American families.

The Center for American Progress Action Fund released a memo in November urging the 110th Congress to take steps to create a fairer tax system in its first 100 days in office by expanding the Child Tax Credit and Earned Income Tax Credit. View the full agenda here:

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