The FY 2015 budget proposal unveiled by the President this week addresses an issue that many politicians, researchers and commentators across the political spectrum have recently been talking about – providing assistance to low-income working adults who don’t have dependent children. We were very pleased to see the part of his budget that would help that long-overlooked population by making more “childless” workers eligible for the federal Earned Income Tax Credit (EITC) and increasing the small credit for those who are already eligible.
The EITC encourages and rewards work, offsets federal payroll and income taxes, and boosts living standards. As the Center on Budget and Policy Priorities (CBPP) points out: “Next to Social Security, the EITC combined with the refundable portion of the CTC [child tax credit] constitutes the nation’s most powerful anti-poverty program.” However, the federal EITC currently provides little or no benefit for adults who don’t have dependent children, and the Wisconsin EITC doesn’t apply to that population. Read more
Important tax credit eligibility information for Wisconsin families.
About 22,000 military families in Wisconsin receive the federal Earned Income Tax Credit (EITC) or the low-income component of the Child Tax Credit (CTC), according to a new report from the Washington, DC-based Center on Budget and Policy Priorities.
Nationally, roughly 1.5 million military families, which include about 3 million children under age 18, received one or both of the credits. The credits make a major difference to their economic security:
- The EITC and CTC together keep more than 140,000 military families — with nearly 300,000 children and 600,000 total family members — from falling below the poverty line, based on the federal government’s Supplemental Poverty Measure, which counts income from tax credits.
- These credits reduce the severity of poverty for about another 800,000 members of military families.
- The credits also help working families with incomes modestly above the poverty line who still struggle with basic expenses like housing, school clothes, car repairs, and groceries.
Congress faces a choice.
It can extend a tax break for a tiny number of wealthy estates. Or — for about the same amount of money — Congress can continue improvements to two tax credits that encourage work and help millions of people pull themselves out of poverty.
In Wisconsin, the tax break for wealthy estates would benefit only 40 estates a year, according to a new report. In contrast, the improvements to the tax credits would give a boost to 155,000 low- and moderate-income working families in Wisconsin.
3,800 to 1 = Ratio of WI Families Hurt by Tax Credit Changes, Compared to the Estates Benefiting from Estate Tax Cut
In the next two or three months, Congress will have to choose between two starkly different tax options that have divided the U.S. House and the Senate. It’s a choice that has been overshadowed by other parts of the debate over expiring tax provisions, but it will be a telling vote on legislative priorities.
Lawmakers can extend a tax break for a tiny number of wealthy estates. Or – for about the same amount of money – Congress can continue improvements to two tax credits that encourage work and help millions of people pull themselves out of poverty.
In Wisconsin, the tax break for wealthy estates would benefit only 40 estates a year, according to a new report. In contrast, the improvements to the tax credits would give a boost to 155,000 low- and moderate-income working families in Wisconsin. Read more
If you don’t read the WCCF blog, let me bring you up to date on what we know and don’t know about funding in the next biennial budget for the state’s Earned Income Tax Credit (EITC).
The Dept. of Children and Families’ budget request for the 2013-15 biennium recommends a large reduction in one of the funding sources for the EITC. Beginning in fiscal year 2014-15, DCF proposes cutting $37 million from the portion of the credit’s funding that comes from the block grant known as Temporary Assistance for Needy Families (TANF). But since the rest of EITC funding is the responsibility of the Dept. of Revenue, the DCF recommendation doesn’t tell us whether the intent is to reduce total EITC funding or only to shift the funding sources.
In a post on the WCCF Blog on Monday, I explain why a funding shift could be a good thing for important programs for low-income kids, such as the Wisconsin Shares child care subsidy program. Read more
Working Class Families Would Pay More in Taxes
Compared to President Obama’s tax plan, the tax package supported by Congressional Republicans would give big tax breaks to the top earners in Wisconsin, while raising taxes paid by working class families in the state.
The President’s and the GOP plan differ in two main respects: First, President Obama’s plan continues the Bush tax cuts for income up to $250,000, while the GOP plan continues the tax cuts for all income levels. Under the president’s plan, high earners would still receive tax breaks on the first $250,000 of their income.
Second, the president’s plan also continues improvements in tax credits for working-class and middle-class families. The GOP plan does not continue these improvements.
On average, Wisconsin taxpayers earning less than $250,000 would pay an average of $50 more in taxes under the GOP plan than the Obama plan, according to a report released by Americans for Tax Fairness. Read more
Wisconsin families with children could lose $139 million in tax credits next year – nearly $900 per affected family – unless expansions of two tax credits aimed at working families are preserved. President Obama and Congressional Democrats have proposed extending the expanded credits, and Congressional Republicans favor letting the expansions expire.
In jeopardy are the Child Tax Credit and the Earned Income Tax Credit, both of which were expanded by the Recovery Act in 2009. The effect of expanding the credits was two-fold: the credits helped pump more money into the economy to boost consumer demand, and they also helped mitigate the worst effects of the recession for the families receiving the credits. The expansions are set to expire at the end of 2012, at the same time the Bush tax cuts expire, the temporary payroll tax cut expires, and the federal unemployment program ends.
President Obama has proposed to make the expanded versions of the tax credits permanent. Read more
IRP Research Shows Antipoverty Programs Reduced Unofficial Poverty Rate in Wisconsin in 2010
A report released Wednesday by the Institute for Research on Poverty (IRP) at UW Madison examines the effects of the antipoverty programs on the poverty rate in Wisconsin. Not surprisingly, the official measure of poverty shows an increase in Wisconsin between 2009 and 2010. However, the IRP’s alternative gauge of poverty (the “Wisconsin Poverty Measure” or WPM) showed a decrease in the poverty from 11.1% to 10.3%.
Whereas the official poverty measure is based just on pre-tax cash income, the WPM uses a broader lens that also examines taxes, tax credits, and “near cash” income such as food stamps. Last year the IRP concluded that from 2008 to 2009 the alternative poverty measure was flat in Wisconsin, because the drop in families’ income was offset by tax credits and food assistance benefits, which were enhanced that year by the federal Recovery Act. Read more
As the calendar turned to 2012, many of Wisconsin’s working families began to feel the effects of state budget cuts and policy changes made in the biennial budget bill signed into law last July. According to a new synopsis of delayed budget changes by Wisconsin Council on Children and Families, working families are beginning this month to be adversely affected by a number of changes, such as reduced tax credits, higher health care premiums and copays, and a new waiting period for unemployment insurance benefits.
“The range of changes that will make things tougher for Wisconsin families starting this year is startling,” said Ken Taylor, executive director of the Wisconsin Council on Children and Families. “At a time when so many working families are just starting to get back on their feet in the wake of the recession, it’s troubling to see just how many policy changes are going to make it more difficult for them to bounce back economically.”