For many Americans with low incomes, it’s a constant challenge to keep up with expenses and provide for their kids’ basic needs. Many parents work hard but have struggled because the cost of living has increased faster than their pay.
At the same time, our federal tax code has been manipulated time and again to benefit the wealthiest households and large, profitable corporations. The 2017 tax law, for example, will provide a larger benefit to the top 1 percent than to the bottom 80 percent combined.
A new federal proposal, co-sponsored by Senator Angus King, would begin to fix our tax code and help working people with low incomes provide for themselves and their families. These workers include teachers, carpenters, cashiers, and home health aides among others.
The proposal, called the Working Families Tax Relief Act, or WFTRA, would put more money into the pockets of working families. Under the bill, a single mom of two earning $20,000 a year would get a nearly $3,700 boost. And, a married couple with two young kids making $45,000 a year would get a $3,500 boost.
Notably, the bill would have lasting benefits beyond just the near-term advantage of increased income. It would spur long-term benefits for millions of children of low-income parents.
The increased income from refundable tax credits means parents are more likely to access prenatal care and have healthier babies. Those children are also less likely to experience health problems associated with poverty, and research shows that they are likely to do better in school and are likelier to attend college. [i]
How the WFTRA works
The Working Families Tax Relief Act builds on two successful federal tax programs: the Earned Income Tax Credit, or EITC, and the Child Tax Credit, or CTC.
The EITC is a tax break for working people with low incomes. It encourages and rewards work by giving employed low- and moderate-income people a little more money to help cover the basics, which in turn helps communities and our economy.
The Working Families Tax Relief Act would increase the maximum credit available to families with children by roughly 25 percent. For those families, the maximum credit would be $7,649 — a roughly $1,100 increase over the current maximum.
It would also increase substantially the credit available to low-income workers who are not raising children. Those households are ineligible for many of the tax credits that help low-income families. As such, they are the only group that are currently pushed into or further into poverty by the federal tax code. The bill increases the maximum EITC for childless workers from $530 today to $2,070.
The income cap on eligibility for the EITC will continue to vary based on filing status and number of dependent children. However, the WFTRA will extend eligibility further into the middle class. For example, the cap for married parents with three children will increase from $55,952 to $61,141.
The Child Tax Credit, or CTC, currently provides a $2,000 tax credit to parents for each eligible dependent child under 17 years old. Under current law, a two-child household that owes $4,500 in taxes would instead owe just $500 after claiming the CTC.
Today, only a portion of the CTC is refundable, meaning the lowest-income families receive less benefit from the credit. The Working Families Tax Relief Act would make the credit fully refundable, boosting the effectiveness of the credit for those who earn the least by increasing the size of their tax refund. The bill also creates a new Young Child Tax Credit worth an additional $1,000 for each child under 6 years old, bringing the total credit for young children to $3,000.
Who benefits?
The WFTRA would provide an average boost to after-tax income of $2,000 for families with children. In Maine, 187,000 households would benefit, including 164,000 children.
The Center on Budget and Policy Priorities recently analyzed federal data to determine which occupational groups in Maine would benefit most from the WFTRA. Retail workers, home health care aides, food service workers, and cleaners top the list. Notably, elementary and middle school teachers also ranked on the list. The 4,700 teachers who would benefit from the bill represent one in four elementary and middle school teachers in the state.[ii]
These occupations employ some of the lowest-paid workers in the state, many of whom work unreliable hours. The WFTRA would help them provide for themselves and their families, and give them a better toehold in our economy.
| Rank | Occupation | Number of workers who would benefit |
|---|---|---|
| 1 | Cashiers | 7,800 |
| 2 | Retail salespersons | 7,300 |
| 3 | Nursing, psychiatric, and home health aides | 5,600 |
| 4 | First-line supervisors/managers of retail store workers | 5,300 |
| 5 | Cooks | 5,200 |
| 6 | Maids and housekeeping cleaners | 5,100 |
| 7 | Janitors and building cleaners | 5,000 |
| 8 | Personal and home care aides | 5,000 |
| 9 | Carpenters | 5,000 |
| 10 | Laborers and freight, stock, and material movers, hand | 5,000 |
| 11 | Elementary and middle school teachers | 4,700 |
| 12 | Driver/sales workers and truck drivers | 4,400 |
| 13 | Customer service representatives | 4,300 |
| 14 | Construction laborers | 4,100 |
| 15 | Waiters and waitresses | 3,900 |
Endnotes
[i] https://www.cbpp.org/research/federal-tax/eitc-and-child-tax-credit-promote-work-reduce-poverty-and-support-childrens#_ftn38
[ii] According to US Census ACS data for 2017 there were 19,303 elementary and middle school teachers in Maine.
