USCCB - (SDWP) - Tax Relief for Low Income Families

Tax Relief for Low Income Families

The United States Conference of Catholic Bishops has been a consistent supporter of changes in the tax code to help low income families cope with the cost of raising children, particularly a refundable Child Tax Credit and the Earned Income Tax Credit (EITC). As the Administration and Congress adjust and accelerate various provisions of the tax code, two proposals to change current tax laws are necessary to help low and moderate income families. Accelerating the size of the Child Tax Credit and maintaining its refundability and expanding the Earned Income Tax Credit (EITC) for married couples would continue to move many families out of poverty. These efforts would greatly benefit families of modest means.

All families need help in providing for their children and accelerating the tax credit will bring welcome relief to many families. However, immediately raising the Credit to $1,000 per qualifying child will not help most low income and many moderate income families who pay payroll taxes but little or no income tax. Therefore, just as the Child Tax Credit is being increased to $1000 now, it is essential to adjust the measures which make the credit refundable to help low income families who would otherwise not benefit from the increase.

Increasing the amount of the Child Tax Credit but not addressing the issues of refundability and indexing, leaves behind millions of poor and working families. Nearly 9 million children from 3 million low and moderate income families (all working families) would receive little or no help from the Administration's proposed expansion of the Child Tax Credit. To help these families, Congress must the change the refundability formula and deal with indexing.

Wouldn't such changes in the "refundable" child tax credit be expensive?
Adjusting the formula in the refundable Child Tax Credit is estimated to cost about $2 billion per year or $20 billion over the next ten years, a relatively small amount of money in terms of the overall size of the tax cuts being discussed ($670 billion over ten years).

Wasn't the Earned Income Tax Credit just expanded recently?
Yes, the Bishops' Conference worked hard to improve the EITC in 2001. While we were unable to help families with three or more children, we were successful in helping married couples whose combined income would have disqualified them for the EITC benefits. In 2002, married workers filing jointly with incomes below $34,178 can receive as much as $4,140, which is $1,000 more than the EITC provides to non-married workers ($33,178). This $1,000 difference is scheduled to increase to $3,000 over the next few years. We believe this increase should be accelerated just as other provisions of the 2001 tax cut are being accelerated. Low income workers should share in tax relief.

What does Catholic teaching say about these issues?
For the Bishops' Conference these are not new issues. The Catholic bishops are consistent supporters of changes in the tax code to assist low and moderate income families, especially the refundable Child Tax Credit and the Earned Income Tax Credit. In their statement, Putting Children and Families First, the bishops asserted: "Decent jobs at adequate wages–what used to be called a ‘family wage'–are the most important economic assets for families.... We welcome proposals to reform the tax code to help families cope with the high cost of raising children. These proposals, which have drawn bipartisan support, would allow middle income families with children to keep more of what they earn and would help lift low income families out of poverty.... We continue to support an expanded earned income tax credit to assist poor, working families. This pro-work, pro-family provision needs to be enhanced and supported as an important contribution to tax fairness."

For more information: Thomas Shellabarger, United States Conference of Catholic Bishops (202) 541 3189; tshellabarger@usccb.org

February 2003