Schatz Joins Senate Democrats in Supporting Working Families Tax Relief Act

Press Release

By:  Brian Schatz
Date: April 26, 2013
Location: Washington, DC

Senator Brian Schatz joined U.S. Senators Sherrod Brown (D-OH) and Dick Durbin (D-ILL) in supporting The Working Families Tax Relief Act of 2013 that would permanently enhance critical refundable tax credits that help keep millions of working families out of poverty. It would strengthen and expand the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).

"This legislation would benefit Hawaii's hard-working families by ensuring they take home more of their paycheck in order to put food on the table," said Senator Brian Schatz. "I thank my colleagues Senators Durbin and Brown for taking the lead on providing tools for families that work hard so that they can live the American dream."

This legislation introduced by Senators Sherrod Brown (D-OH) and Dick Durbin (D-IL) would:

*Make permanent enhancements to the Earned Income Tax Credit: Working families with two or more children qualify for an EITC equal to 40 percent of the family's first $12,570 of income. The Recovery Act of 2009 increased the EITC to 45 percent for families with three or more children, and the bipartisan agreement to avert the fiscal cliff extended these reforms -- but only through 2017. The EITC is too important to families to let expire. In 2011, according to the Internal Revenue Service (IRS), the EITC lifted 6.6 million Americans out of poverty, 3.1 million of whom were children. According to recent estimates, allowing the expanded EITC to expire would increase taxes on 6.5 million families with income below $50,000.

*Make permanent enhancements to the Child Tax Credit:The CTC allows a family to reduce federal income tax liability by up to $1,000 per child. CTC became public law in 1997 through a bipartisan agreement. The 2001 "Bush" Tax Cuts began a phased in increase of the credit from $500 - $1,000 and an increase in the refundable portion of the bill. The Recovery Act reduced the salary threshold for claiming the refundable portion of the credit to income above $3,000. An analysis of Census data showed that these provisions lifted 900,000 people above the poverty line in 2011. According to recent estimates, letting the expanded CTC expire would increase taxes on 12 million families who would see the size of their CTC credit shrink, and five million families would no longer be eligible for the credit at all.

*Strengthen the Earned Income Tax Credit:Under current law, the EITC for workers with no children is too small to offset federal taxes for workers at the poverty line. As a result, low-wage workers not raising minor children are the only Americans taxed into poverty. The legislation would expand access to the EITC and the size of the credit, in order to enable a full time worker receiving the minimum wage to be eligible for the maximum EITC.

*Change the Eligibility Age: Under current law only individuals older than 25 and younger than 65 are eligible for the childless component of the EITC. The legislation would expand eligibility to individuals older than 21.

*Simplify the Earned Income Tax Credit: The legislation would eliminate a major source of inadvertent fraud by simplifying the rules for claiming the EITC. The bill makes it simpler for parents to understand who can claim a child and for divorced parents to properly file for their EITC. The bill also eliminates rules that penalize working families for saving and investing their savings.