Ways and Means Committee Democrats today introduced legislation to extend the Earned Income Tax Credit, the Child Tax Credit and the American Opportunity Tax Credit, three vital refundable tax provisions that Republicans have proposed vastly curtailing (and ending entirely, in the case of the AOTC) as part of their Bush tax cut extension for the wealthiest Americans. The extension of the three credits will also be included in the Democratic alternative to the Republican tax cut proposal to be voted on next week. That Democratic proposal will extend the Bush tax cuts for households with incomes below $250,000. Human Resources Subcommittee Ranking Member Lloyd Doggett (D-TX) is the lead sponsor of the extension of the AOTC, while Select Revenues Subcommittee Ranking Member Richard Neal (D-MA) is the lead sponsor of the extension of the EITC and CTC.
The proposal would extend:
Child Tax Credit: Generally, taxpayers with income below certain threshold amounts may claim the child tax credit to reduce federal income tax for each qualifying child under the age of 17. The Bush tax cuts increased the credit from $500 to $1,000 and expanded refundability. The amount that may be claimed as a refund was 15% of earnings above $10,000. The American Recovery and Reinvestment Act of 2009 provided that earnings above $3,000 would count towards refundability. This proposal extends the current child tax credit for an additional year, through 2013.
Earned Income Tax Credit: Under current law, working families with two or more children currently qualify for an earned income tax credit equal to 40% of the family's first $12,570 of earned income. The American Recovery and Reinvestment Actincreased the earned income tax credit to 45% for families with three or more children and increased the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children) to lessen the marriage penalty. This proposal extends for an additional year, through 2013, the American Recovery and Reinvestment Act provisions that increased the credit for families with three or more children and increased the phase-out range for all married couples filing a joint return.
American Opportunity Tax Credit: Created under the American Recovery and Reinvestment Act, the American Opportunity Tax Credit is available for up to $2,500 of the cost of tuition and related expenses paid during the taxable year. Under this tax credit, taxpayers receive a tax credit based on 100% of the first $2,000 of tuition and related expenses (including course materials) paid during the taxable year and 25% of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent of the credit is refundable. This tax credit is subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly). This proposal extends the American Opportunity Tax Credit for an additional year, through 2013.
"While rightly concerned with the federal deficit, we must also remain concerned with the "opportunity deficit,' when students cannot develop their God-given potential to the fullest extent," said Human Resources Subcommittee Ranking Member Lloyd Doggett (D-TX). "Extending the "More Education' tax cut will continue to close this gap, allowing more students to achieve all the education for which they are willing to work."
"As we address the expiring tax provisions, it's critical that we not forget middle-income and working poor families," said Select Revenues Subcommittee Ranking Member Richard Neal (D-MA). "Even though the Republicans tell us that they're against raising taxes, what they really mean is they're against increasing taxes on the wealthy. The House and Senate Republican tax packages would raise taxes on millions of low and moderate-income families at the end of this year. I urge my House Republican friends to break with the Senate and extend the enhancements to the child tax credit and earned income tax credit from my bill when they bring the legislation to the House floor."
"Republicans are not only threatening a tax hike on middle-income Americans by holding their tax cuts hostage, they are pushing for a tax increase on 25 million lower-income families," said Ways and Means Committee Ranking Member Sander Levin (D-MI). "These refundable credits are of vital importance to tens of millions of families and it is critical that they be extended alongside the middle-class tax cuts. Republicans have it upside down: In helping the very wealthy few they are jeopardizing the financial well-being of everyone else."
"At a time when nearly one out of six Americans live in poverty, it's absolutely critical that we extend the Earned Income Tax Credit (EITC), Child Tax Credit and the American Opportunity Tax Credit that will help lift millions out of poverty and make college more affordable for students," said Ways and Means Chairman Emeritus Charlie Rangel (D-NY). "In particular, the EITC has become our nation's largest and most important anti-poverty program, offering an average of $1,700 per year to each of 20 million low-income working families. As the largest federal work support program in the country -- $37 billion in tax relief annually-- the EITC moves over 2.5 million children above the poverty line each year, more than any other federal program. I was proud to fight for the expansion of this program before, and I will fight for it again this time."
"At a time with a growing number of American families are living in poverty, Congress should be focused on policies to reverse that disturbing trend," said Health Subcommittee Ranking Member Pete Stark (D-CA). "Instead, House Republicans are fighting to preserve massive tax breaks for millionaires and billionaires and allowing vital tax programs that help needy families to expire."
"As Republicans hold the line on tax cuts for the wealthy, critical education and child care tax credits are set to expire for millions of students and working families," said Trade Subcommittee Ranking Member Jim McDermott (D-WA). "The President has offered a compromise that would give millions of families certainty as Congress debates tax cuts for the top 2% of Americans. These credits, which benefit millions of working class families and students, are a no-brainer and should be passed immediately."
"I stand in support of the millions of working American families who these tax credits have helped to lift out of poverty and into the middle class -- over seven million families last year alone," said Oversight Subcommittee Ranking Member John Lewis (D-GA). "They helped students pay for college. They helped families care for their children. They helped families adopt children. They helped millions buy homes. They helped make work pay. They helped middle class families do just a little bit better. Programs like the Earned Income Tax Credit encourage and reward work. They give dignity to people who work hard each and every day. I support these tax credits and will fight to improve these programs and give these hardworking families a fair shake."