WASHINGTON, D.C. – U.S. Senator Tammy Baldwin released the following statement on the Protecting Americans from Tax Hikes (PATH) Act, a tax extenders package which makes permanent critical provisions of the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC) and the American Opportunity Tax Credit (AOTC). These provisions, which were set to expire in December 2017, provide critical relief for Wisconsin’s families and college students.
In Wisconsin, more than 301,000 children in 158,000 working families benefit from the EITC and CTC becoming permanent. Wisconsin families who benefit from these tax credits could have lost an average of $1,100 per year if they had expired.
“At a time when Wisconsin residents are struggling to get ahead as our state’s economy continues to lag behind, and as student debt is at a crisis level, I’m proud to support these critical investments that will continue to provide some much-needed relief for Badger State families and students, while making significant strides to reduce the disturbing levels of poverty in our communities,” said Senator Baldwin.
“It’s great news that Congress has permanently extended the improvements in tax credits for families, which are among the nation’s strongest tools to help working families escape poverty and achieve greater self-sufficiency,” said Ken Taylor, Executive Director of the Wisconsin Council on Children and Families. “These tax credits lift 5 million children out of poverty, more than any other program, and research shows they have done as much or more as welfare reform to raise employment among single mothers.”
Julie Kerksick, Senior Policy Advocate, Community Advocates Public Policy Institute said, "We applaud the federal legislative initiative that makes permanent the improvements that Congress made several years ago to the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). Both the EITC and CTC are powerful tools for encouraging work, reducing poverty, and strengthening families. The improvements now made permanent go even further in assisting the lowest income working families, those with three or more children, and those headed by married couples.
"We congratulate Senator Baldwin and other federal legislators who helped achieve these important gains. Their action, according to the Brookings Institution Metropolitan Policy Center's MetroTax Model based on 2014 tax filings, has protected over 100,000 Wisconsin working families from losing over $62 million."
The Center on Budget and Policy Priorities estimates over 13 million families, including 25 million children, would have lost all or part of their EITC or CTC if these provisions had not been made permanent.
In October, Senator Baldwin introduced the Child Poverty Act in order to establish a national target to reduce the number of children living in poverty in the United States – by half in the first 10 years, and completely eliminate in 20 years.
Earned Income Tax Credit (EITC)
The American Recovery and Reinvestment Act of 2009 (ARRA) provided a temporary increase in EITC for taxpayers with three or more qualifying children. It also increased the beginning point of the credit’s phase-out for all married couples filing joint returns—greatly reducing the marriage penalty that exists in EITC. Without congressional action, beginning in 2018 families with three or more children would have claimed the same credit as families with just two or more children. That would have been a cut of more than $700 for these working families. Without congressional action, marriage penalty relief would have been reduced, shrinking the EITC for many low-income married filers.
Child Tax Credit (CTC)
More families are eligible for and are able to make use of the Child Tax Credit because of the Recovery Act. Without extension, the earnings need to qualify for the credit would dramatically increase and families could lose some or all of their Child Tax Credit.
American Opportunity Tax Credit (AOTC)
Prior to AOTC there were two permanent education tax credits, the Hope Credit and Lifetime Learning Credit. AOTC replaced the Hope Credit through the end of 2017. The AOTC is both larger and more widely available than the Hope Credit. The Lifetime Credit remains unchanged as a refundable tax credit up to $2,000.
AOTC is a partially refundable tax credit that provides financial assistance to taxpayers attending college or whose children are attending college. The credit is worth up to $2,500 per student and can be claimed for a student’s qualifying expenses for the first for years of post-secondary education. The Hope Credit was a $1,800 credit that could be claimed in the first two years of post-secondary education. Additionally, required course materials are included on the list of qualified expenses for this AOTC.