WASHINGTON, D.C. – U.S. Senators Tom Udall and Martin Heinrich reintroduced legislation that would help extend and expand two critical tax credits that help put money back in the pockets of working families in New Mexico, where almost a third of children live in poverty. The Working Families Tax Relief Act would expand access and value of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) to ensure that no worker can be taxed into poverty by the federal tax system. Over 75,000 New Mexicans were lifted out of poverty by these tax credits, including 40,000 children, each year during 2011-2013.
“It shouldn't be so difficult for hard working New Mexicans to get ahead, but too many people in our state are struggling,” Udall said. “We should be supporting America's working families, and providing relief wherever possible. That’s why I've cosponsored the Working Families Tax Relief Act to help more people who are working access better tax credits, and hold on to more of their hard earned cash to meet growing expenses like rent, child care, groceries, and school supplies.”
“Too many hard-working families in New Mexico find themselves struggling to make ends meet each month. That’s why my number one priority is to level the playing field so everyone has an opportunity to get ahead,” said Heinrich. “These tax credits support working families and allow them to keep more of their hard-earned money.”
Together, the EITC and CTC help lift Americans out of poverty. The EITC is a refundable tax credit for low-income Americans that encourages work and helps families make ends meet. The CTC is available for taxpayers with children in the amount of up to $1,000 per child under age 17. In 2015, the CTC lifted 1.6 million children out of poverty.
The Working Families Tax Relief Act would do four things:
- Expand EITC for Childless Workers: Workers who don’t claim children are the sole group that the federal tax system can tax into poverty or deeper into poverty. There is a small credit for workers not raising children in the home, but the maximum credit amount is $510 and the credit begins to phase out at $8,340 and phases out completely at $15,010. In addition, all workers that do not claim children and are younger than 25 are ineligible for the EITC. The result is that the EITC for a full-time, minimum-wage worker not claiming children is $27 – making workers who do not claim children the only group of taxpayers that can be taxed into poverty. The Working Families Tax Relief Act reduces the age limit to qualify for the EITC from 25 to 21 and expands the size of the credit so the same full-time, minimum wage worker would earn a refundable credit of approximately $913.
- Strengthen the Child Tax Credit for Families with Young Children: The bill builds on the proven success of the CTC to lift children out of poverty. The legislation will focus on the most vulnerable children by allowing taxpayers to claim a refundable credit equal to 45 percent of each dollar earned up to a maximum credit of $3,000 per-child under six years of age.
- Index the CTC to inflation: A recent study from Columbia University concluded that if the CTC is not indexed, 750,000 children under 17 and their families will fall below the poverty line by the end of the decade. This bill would index the maximum CTC and the income thresholds at which the credit begins to inflation.
- Make it easier to claim the EITC: The bill includes a pair of bipartisan measures, originally proposed by the George W. Bush Administration, designed to simplify and clarify who can claim a child. The first proposal simplifies the complicated rules for how parents who are separated can claim the EITC. The second proposal allows filers who live with a qualifying child, but do not claim the child for the EITC, to claim the childless EITC proposed in the bill.
A copy of the bill is available here.