1. Update
  2. Economic Justice

Tax Credits Keep Millions Out of Poverty

The EITC and Child Tax Credit are two of our nation’s most effective anti-poverty programs. Congress must act to strengthen them.

By Amelia Kegan, April 18, 2019


April 15 marked Tax Day. We often talk about the federal budget as a moral document, which outlines the priorities of our nation. If we want to have an honest conversation about our nation’s spending, we also must discuss taxes, the revenue side of the budget equation.

Two of our most effective programs for reducing poverty and promoting economic mobility in America are embedded in our tax code: the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). Together, these two credits prevent more people from falling into poverty than any other program in the country, excluding Social Security.

In 2016 alone, the EITC and CTC prevented more than 28 million people from falling into, or deeper into, poverty, including 12 million children.

In 2016 alone, they prevented more than 28 million people from falling into, or deeper into, poverty, including 12 million children.

Yet these programs have some holes that leave out millions of people. Adults not raising children and residents of Puerto Rico are limited to a very small EITC. Low-income families can only count earnings above $3,000 towards their Child Tax Credit. The refundable portion of the credit is capped at $1,400 per child for low-income families whereas wealthier families receive $2,000 per child for the CTC. Moreover, families in Puerto Rico cannot claim the Child Tax Credit if they only have one or two children.

Legislation has been introduced in the House and Senate to address these shortfalls and improve the EITC and Child Tax Credit for more American families. Sens. Sherrod Brown (OH), Michael Bennet (CO), and Dick Durbin (IL) recently introduced the Working Families Tax Relief Act. In the House, Rep. Rosa DeLauro (CT-03) has the American Family Act (H.R. 1560), a bill to improve the Child Tax Credit. Rep. Richard Neal (MA-01) has previously introduced the Earned Income Tax Credit Improvement and Simplification Act (H.R. 822), a bill to improve the EITC.

The EITC and CTC are two programs that traditionally receive broad, bipartisan support. In 2014, President Barack Obama and Speaker Paul Ryan had very similar proposals to expand the EITC for adults not raising children.

The Working Families Tax Relief Act, the American Family Act (H.R. 1560), and the Earned Income Tax Credit Improvement and Simplification Act (H.R. 822) may not become law this year. However, they lay the ground work for important reforms to tax policy that would dramatically benefit the lives of millions of low-income working families. Congress should be committed to including some of their provisions in any moving tax legislation this session.

Many businesses and wealthier individuals saw a major tax boost with the passage of the Tax Cuts and Jobs Act (Pub.L. 115–97) at the end of 2017. That wasn’t true for many Americans across the country. Expanding the EITC and Child Tax Credit are two ways in which Congress can enact critical tax policy that will benefit those left behind by the 2017 tax law, but who should’ve been top priority for its benefits.

Amelia Kegan

  • Legislative Director, Domestic Policy

Amelia Kegan leads the domestic policy team's work in analyzing legislation, advocating on Capitol Hill, and developing legislative strategy. Prior to coming to FCNL, Amelia worked at a variety of other national non-profits in D.C. and Chicago, focusing on federal budget, tax, and low-income policy.