Margaret Hulbert is the Senior Vice President, Chief Public Policy Officer for United Way of Greater Cincinnati.
As United Way and many of our partners work together to identify and address the complicated and myriad causes of poverty, one of the most important, but perhaps not obvious to many, is our country’s tax policy. Who pays taxes and how much they pay is not just a philosophical question. For many low income families, tax policy determines whether or not they can afford the basic necessities of food, rent and utilities.
Our current tax code primarily benefits higher income households by subsidizing home ownership, retirement accounts and other savings and investments. Low and moderate income families, even working full time, typically do not have the income necessary to utilize these tax subsidies because they need all their income just to make ends meet.
However, there are solutions already built into the tax code. We need only to expand them to include more people who would benefit the most from them.
The Earned Income Tax Credit (EITC) is a federal credit specifically for working individuals and families that earn low or moderate incomes. Enacted in 1975 with strong bipartisan support, the tax was created to reduce the tax burden on lower income workers, supplement their wages and encourage their participation in the workforce. It has become the nation’s largest and most effective anti-poverty program, and it is one designed to reward working families and individuals.
The Child Tax Credit (CTC) was enacted in 1997 to help working families offset the cost of raising children and has been instrumental in reducing child poverty. The CTC is worth up to $1,000 per eligible child. Both the EITC and the CTC are refundable credits. A refundable tax credit is treated as a payment. If the total of all payments or credits is more than a person's total tax liability, the Internal Revenue Service refunds the overpayment to the taxpayer.
Unfortunately, lower income working Americans who are not raising children at home access little or no EITC. Young people age 21-24 are also ineligible. This affects about half a million Ohio workers, including about 30,000 military families, who would otherwise be eligible for the credit. So while the EITC is one of the most effective tools we have to help working families keep their heads above water, it excludes millions of workers.
We urge Congress to expand this policy by including workers not raising children at home and by lowering the age of eligibility to 21. Fortunately, there is bipartisan support for these changes. Such disparate voices as House Speaker Paul Ryan and Ohio Senator Sherrod Brown have put forth proposals that would expand the credits and include these individuals and families. It is our job to let our elected officials know that we support these changes.
As you prepare your 2016 tax returns, think about those who could benefit from these important credits. Americans believe in getting ahead by working hard. Let’s make sure that hard work pays off for everyone.