WASHINGTON, D.C. – Today, U.S. Sen. Dick Durbin, D-Ill., and several others in his party in both the Senate and House, introduced a series of bills aimed at cutting taxes for the middle class.
Specifically, the Senate and House Democrats introduced legislation to extend beyond 2017 the Earned Income Tax Credit and Child Tax Credit expansions and the American Opportunity Tax Credit, expand the Child and Dependent Care Tax Credit, and create a new 21st Century Worker tax cut. Summaries for each of the bills and their sponsors are below.
“Strengthening these tax credits is pro-family and pro-worker and will help lift millions of working families out of poverty,” Durbin said. “The Child Tax Credit and the Earned Income Tax Credit encourage work, help families make ends meet, and lead to healthier and better educated children. My colleagues and I are committed to getting them passed on behalf of all Americans.”
Here are the bill summaries:
Working Families Tax Relief Act
The Working Families Tax Relief Act would expand and extend the Earned Income Tax Cred (EITC) and the Child Tax Credit (CTC). In addition to making the 2009 expansion of both tax credits permanent, the bill would expand EITC for workers without children, index the CTC to inflation, and make it easier for working Americans who qualify to claim the EITC.
American Opportunity Tax Credit
The expanded AOTC legislation would take the previous AOTC one step further and enable families to offset the increasing cost of college tuition by growing the savings they can receive per student through the tax credit. For every dollar a family spends on college tuition, they could get a dollar off their taxes up to $3,000. The original AOTC tax credit is currently only available to families earning less than $180,000 per year and only provides a tax credit of up to $2,500. The new bill would grow the savings a family can receive per student to $3,000 per year and make the credit available to families earning up to $200,000 per year.
First, the bill would make the AOTC a permanent part of the tax code, eliminating uncertainty that it will be extended for many families who depend on it. Second, the bill would increase eligibility by changing the lifetime limit of the credit from a number of years claimed — four years under current law — to a maximum monetary amount of $15,000. For students enrolled full-time, the new AOTC formula would cover 100 percent of the first $2,000 and 25 percent of the next $4,000 of qualifying expenses, for a credit of up to $3,000 per year. For students enrolled in less than half an institution’s normally required course load for a given year, the formula would cover 30 percent of the first $10,000, for a credit of up to $3,000 per year as well. Third, the bill would expand eligibility by allowing families earning up to $200,000 per year—or $100,000 as a single-filer—to take advantage of the credit. Finally, the bill would increase the refundable portion of the credit to $1,500, which will particularly benefit low- and moderate-income students with limited tax liability. If an eligible family does not owe any federal taxes, that family could still receive a refund from the credit, of up to $1,500. The new AOTC bill would boost the value of a potential refund for an eligible family from $1,000 to $1,500 per year per student.
21st Century Worker Tax Cut Act
The 21st Century Worker Tax Cut introduces a new tax credit for parents who both work. The credit will help reduce the large, sometimes insurmountable, additional costs that come when both parents are working, such as child care, transportation, and a higher marginal tax rate. To qualify, couples must file jointly, have at least one child under age 12, and both have earnings. The credit is calculated as 10 percent of the first $10,000 of the second earner’s income. The maximum credit is worth $1000 and begins to phase out starting at $110,000 of income.
Helping Working Families Afford Child Care Act
Child care costs have risen dramatically in the past several decades, and the main tax credit intended to help defray these costs has not kept up with the changing times. The Helping Working Families Afford Child Care Act will reform the Child and Dependent Care Tax credit so that it delivers a larger benefit to more families. Under the legislation, the allowable expense limit will be raised to $8,000 — closer to the average cost of childcare today, the credit rate will be flattened at 35 percent for most middle-income families, and the credit will be made refundable, so low-income families can benefit as well. Today, most families get only a $600 credit, but with these reforms, the credit will be $2,800 for most low and middle-income families.