WASHINGTON ― Congress has not reached a deal to fix mistakes in the 2017 Republican tax law in exchange for providing new tax benefits for the working poor.
Democrats wanted to expand tax credits that boost the incomes of working parents and reduce child poverty. Republicans wanted to fix a number of errors in the Tax Cuts and Jobs Act, especially the so-called “retail glitch,” which accidentally deleted a longstanding writeoff for renovations to commercial properties.
But on Monday night, lawmakers revealed their final legislative packages for the end of the year, and they included only minor corrections to the tax law and some extensions, leaving out the potential grand bargain.
The proposed changes to tax credits were somewhat obscure ― even to people who directly benefit from them ― but would have delivered a significant amount of cash to tens of millions of Americans.
A Democratic aide said Republicans would not accept bigger tax credits for low-wage workers as the price of fixing the retail glitch and other problems with the 2017 law, which they rushed into enactment.
A spokesman for Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said Democrats were simply “unwilling to work to resolve these issues, despite ongoing, repeated pleas from affected individuals, small business owners and industries.”
“It’s a sad day,” said Chuck Marr, director of tax policy for the liberal Center on Budget and Policy Priorities. “It’s disappointing that there was an opportunity to make sure low-wage workers are not taxed into poverty and it didn’t happen.”
Presumably, Republicans just couldn’t accept the cost of expanding the credits, which are already major tax expenditures.
The Earned Income Tax Credit went to 29 million households and lifted 3 million children out of poverty in 2018, according to CBPP. If someone works but his or her income is relatively modest, the credit creates a negative tax liability, providing an average cash refund of about $3,000 at tax time ― but only if you’ve got minor children. Since childless workers get little benefit, the federal tax system can be a net burden for them.
House Ways and Means Committee Chairman Richard Neal (D-Mass.) had proposed expanding the EITC to childless workers ― an idea Republicans have previously supported. Neal told HuffPost in recent weeks that he had had good conversations with Grassley about expanding the credit, but apparently the conversations weren’t that good.
There are some modest wins for workers in the end-of-year legislation Congress will approve this week. A new defense spending bill includes the first-ever paid family leave benefit for federal workers. Another spending bill boosts funding for grants that help pay for Head Start and other childcare programs.
But Democrats have missed a chance to correct what they’ve always seen as an imbalanced tax law that overly benefited corporations and the wealthy while doing nothing for the poor.