Democrats Love Tax Credits, And Here's One They Could Get Through Congress

A proposal from Rep. Richard Neal (D-Mass.) would upgrade the Earned Income Tax Credit. The odds against it remain high.

WASHINGTON ― Democrats in Congress and on the 2020 campaign trail have proposed a slew of new tax credits that could dramatically improve life for American workers. Only one of them stands a chance of actually becoming law in the next year.

A bill offered by Rep. Richard Neal (D-Mass.), the chair of the House Ways and Means Committee, would boost the Earned Income Tax Credit for people who don’t have kids.

The EITC gives low-to-moderate income parents a huge bonus at tax time every year. Qualifying households with three or more children can receive $6,557 annually, while childless workers max out at $529. Neal’s measure would push the maximum benefit for a worker with no kids to $1,464.

Republicans used to support expanding the credit for workers without children, but abandoned the idea during President Barack Obama’s administration. Since then they have decided that the credit is “welfare,” describing it as plagued by fraudulent claims from workers who falsely qualify by lying about their wages or number of children.

The reason Neal’s proposal has any chance at passing is that it may become tangled up with other tax provisions that Republicans do care about.

Neal’s committee will vote on the worker tax credit proposal this week alongside another bill to reauthorize a host of expired tax breaks for items such as electric car purchases, railroad track maintenance, and a write-off for “motorsports entertainment complexes.” Lobbyists have been obsessively pushing for the renewal of the so-called tax extenders legislation since the breaks expired in 2017.

Neal’s plan is to have the Earned Income Tax Credit changes, plus a boost to the Child Tax Credit, added to whatever House and Senate negotiators agree on in a final extenders package ― if such legislation ever reaches that stage.

Still, many obstacles loom.

Lawmakers have fussed over whether and how to offset the cost of the tax extenders, and adding Neal’s EITC measure won’t make the fussing easier. One option Neal floated would be to raise the corporate tax rate by one percentage point, which Republicans have already said is a “non-starter.”

Neal suggested last week that his plan, which he did not formally reveal until Tuesday, would partly be a negotiating ploy. “You need a product so that you can play off of it for negotiating purposes,” he told reporters.

The worker tax credits have become a lynchpin of domestic policy for ambitious Democrats, as it draws a sharp contrast with the recent Republican tax reform bill that benefited corporations above all. (Plans to buttress tried-and-true safety net programs, meanwhile, have been getting short shrift.)

Neal’s proposal would cost nearly $100 billion, but it’s one of the more modest of the bunch figuring in the debate among Democrats. No fewer than six other bills to improve tax credits are in the mix, with provisions that include eliminating earnings requirements and delivering benefits in advance instead of after a person has filed taxes.

All the legislation “really does broaden the conversion of things you could at least imagine happening,” Mark Mazur, co-director of the Tax Policy Center, said in an interview. “The goalpost has moved so far.”


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