Today, the House of Representative introduced legislation aimed at reforming the U.S. Tax Code. The highly anticipated proposal was created to simplify taxes and grow the economy. Sadly, it falls short of providing relief to low and middle income working families and donors. Here are some ways tax reform could fix that:
- Make it easy for everyone to claim the Charitable Deduction. The current plan would have devastating effects on charitable giving, by excluding 28 million taxpayers from the charitable deduction. Studies show that doubling the standard deduction, yet failing to make it easy for everyone who gives to claim the deduction, will cost the non-profit sector about $13 billion. This decrease will completely disrupt the non-profit sector’s ability to form public-private partnerships that grow local solutions for issues that plague communities across the nation like youth unemployment, hunger, homelessness, the substance abuse epidemic, etc. Congress should make the charitable deduction available to all taxpayers, not only those who itemize their tax returns.
- Strengthen the Earned Income Tax Credit. The Earned Income Tax Credit (EITC) is a refundable credit that allows low and moderate-income earners to offset federal payroll and income taxes. Only those who work are eligible, allowing them to keep more of what they earn. Studies show that individuals claim the credit for a limited time frame, and spend their returns on transportation, groceries, and childcare. In 2017 it pumped $63.8 million into communities, helping to support local economies and employers. Yet while the EITC is one of the best tools that we have to keep working families afloat, it largely excludes workers that aren’t raising children at home. More than seven million workers like non-custodial parents that still contribute to child expenses, veterans returning home to find stable ground, and students paying for their own higher education are being taxed into poverty because they access little to no EITC. Congress should build on the success of the EITC by increasing the maximum credit for workers not raising children at home, and lowering the age of eligibility to 21.
- Strengthen the Child Tax Credit for those who need it most. Structured similarly to the EITC, the Child Tax Credit (CTC) offsets taxes and is worth up to $1,000 per eligible child. It encourages and rewards work, and in 2016 it lifted 2.7 million people out of poverty—including 1.5 million children. However, eligibility for the CTC doesn’t start until after the first $3,000 in earnings, and phases in very slowly at 15 cents per every dollar earned. Currently, proposals only focus on strengthening the CTC for top earners by increasing the maximum credit and indexing for inflation. Congress should increase the refundability of the CTC for the very low-income.
Congress, let’s get this right! Make the tax code work, for all working Americans.