The problem with the child tax credit

The problem with the child tax credit

For poor families with children, a fully refundable federal child tax credit would be a lifeline, helping to pay for new clothes, more nutritious food, and enriching extracurricular activities for growing kids. But because only higher-income families pay enough in taxes to qualify for the full credit, it isn’t going to the children who need it most. As a result, 35% of children – including 70% of families headed by single mothers – receive less than the full $2,000 that kids in wealthier families get. The New York Times’ Jason DeParle interviewed families in Louisiana’s 5th Congressional District, where 54% of children are too poor to receive the full credit. 

With two children and a third on the way, Ciera Dismuke worked five jobs last year while earning just under $15,000. Although the Trump administration often boasts that it doubled the federal child tax credit to $2,000 per child, Ms. Dismuke, like millions of Americans, earned too little to fully qualify. Instead, she got $934 a child, an increase of just $75. Letha Bradford, a teacher’s aide, qualified for an equally small increase, despite a household budget so tight that she listens to her son’s high school football games outside the stadium to save the admissions fee. Michael Spielberg, a Sam’s Club attendant, also received only a partial credit, while his son, Josh, who has Asperger’s syndrome, doubled up on classes, hoping to graduate early and turn his job bagging groceries into full-time work. “Food has been a bit of a struggle,” said Josh, 16.


Amazon pays less federal income tax than you
Fortune 500 corporations evaded $73.9 billion in taxes in 2018, according to a new report from the Institute on Taxation and Economic Policy (ITEP). ITEP’s Matthew Gardner, Lorena Roque, and Steve Wamhoff used financial filings to identify 379 profitable companies and their effective tax rates for the previous year. Here are some of their key findings.

 

  • The 379 profitable corporations identified in this study paid an effective federal income tax rate of 11.3 percent on their 2018 income, slightly more than half the statutory 21 percent tax
  • 91 corporations did not pay federal income taxes on their 2018 U.S. income. These corporations include Amazon, Chevron, Halliburton and IBM. An ITEP study released in April 2019 examined 2018 Fortune 500 filings released to date and found 60 companies paid zero in federal income taxes. Now, all companies have released their 2018 financial filings, and this report reflects that.
  • Another 56 companies paid effective tax rates between 0 percent and 5 percent on their 2018 income. Their average effective tax rate was 2.2 percent.


To fight human trafficking, address poverty
Regardless of their economic circumstances, young people deserve the safety and security to grow into thriving adults. But homeless youth lead vulnerable lives. Nearly 1 in 5 homeless youth interviewed by the Modern Slavery Research Project were subject to human trafficking – compelled to work through force, fraud, and coercion, not only in the illicit sex and drug trades, but in a wide swath of industries, including agriculture, door-to-door sales, and construction. Policymakers’ attention to this issue generally focuses on punishing traffickers, but as Laura T. Murphy writes for the Jesuit Social Research Institute, survivors of trafficking need policymakers to focus on the root cause of the problem: poverty.

When asked what exploited and trafficked youth need, not one respondent in our study said they needed to see their traffickers punished—and certainly none of them mentioned increasing sentencing. While certainly justice is critical to some survivors’ recovery processes, the sort of prevention through punishment plan that legislators focus on was not at the front of the minds of the survivors with whom we spoke. Instead, what young adult survivors of human trafficking told us was that they needed jobs and a living wage. The majority of those who were trafficked were seeking work opportunities when they were approached by their traffickers. In fact, 91 percent of the youth we interviewed had been approached by someone offering them a job opportunity that sounded (or turned out to be) too good to be true.

 

ACA taxes targeted in House spending package
A $1.4 trillion spending package unveiled by the U.S. House of Representatives on Monday will avert a government shutdown, and includes a repeal of a tax on high-end “Cadillac” health insurance plans long sought by labor unions. The revenue from these items were used to increase health insurance coverage, reduce health care costs and finance health care reform. The deficit tab to repeal the “Obamacare” taxes is $400 billion alone. As Politico’s Susannah Luthi and Caitlin Emma report, the compromise funding bill will remove key sources of healthcare funding: 

The repeal of the three taxes represents an expensive windfall victory for the health care industry, which lobbied intensely against all three taxes since they were first mandated by the Affordable Care Act. … The move all but guts the funding provisions for the Affordable Care Act, with the Cadillac tax repeal alone projected to cost nearly $200 billion. An outdated 2015 estimate from the Congressional Budget Office said a medical device tax repeal would cost about $24 billion over a decade, while the IRS estimated earlier this year that a repeal of the health insurance tax would amount to $15.5 billion just in 2020. 

 

Number of the Day
91 – Profitable Fortune 500 companies that paid $0 in federal income taxes on 2018 U.S. income. (Source: ITEP)