By Andy Nielsen
Congress is currently considering a sizable piece of legislation - the Build Back Better Act. The bill is politically feasible thanks to a wonky federal budget law that allows for budget reconciliation, and would have a transformative effect on individuals, families, and children across the United States. Two provisions that the Indiana Institute for Working Families has been tracking closely are the current expansions to the federal Child Tax Credit (CTC) and Earned Income Tax Credit (EITC). As noted in previous posts (CTC & EITC), these changes are effective for 2021 only, so Congress will need to take action or else these important reforms to our tax code will expire. The good news? The Build Back Better Act steps up to the plate.
The Build Back Better Act extends the changes made to the CTC in the American Rescue Plan (ARP) through 2025. This includes increasing the amount of the credit for children in some households and the option to receive part of the credit through advance monthly payments. However, the Build Back Better Act goes even further by making the credit permanently refundable – you can find a refundability primer on an earlier blog post here – allowing low-income families to capture the full value of the credit. This is extraordinary news for families and households who need it the most.
The bill also eliminates the Social Security Number (SSN) requirement for children, allowing children with Individual Tax Identification Numbers (ITINs) to be eligible for the credit. This is not as much a change as it is a reversion to previous law before the enactment of the Tax Cut & Jobs Act, which established a SSN requirement. Approximately 11,000 additionalchildren in Indiana would be eligible for the CTC under this change.
The Build Back Better Act also makes permanent the ARP’s changes to the federal EITC, expanding benefits to childless workers and widening the eligible age range to include younger and older workers. While this is encouraging news, Congress should seriously consider addressing some of the remaining issues such as expanding the credit to all adults, including those with ITINs, and eliminating the marriage penalty.
Outlook / Next Steps:
Last week, the House Committee on the Budget combined the various components of the Build Back Better Act into one single piece of legislation and reported the bill out of committee. This incorporated CTC and EITC expansions included in the House Ways & Means Committee (discussed above). What is next is far from certain. Larger debates on avoiding a government shutdown, bipartisan infrastructure legislation, emergency funding to address the damage from Hurricane Ida, and raising or suspending the debt ceiling complicate the future of the Build Back Better Act. However, federal lawmakers have a duty to clear the deck and deliver, especially when it comes to public policy that will have a meaningful impact on people’s lives.