Who benefits most from the expanded tax credit for low- and middle-income workers

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A temporary extension of a tax credit for low-to-moderate paid workers could be extended for a year if the Build Back Better bill is passed.

It would be a victory for people without children, especially black workers without children, according to a new report from the Joint Center for Political and Economic Studies.

However, even more improvements to the credit officially known as the Earned Income Tax Credit, or EITC, should be made to help support this population, according to the Washington, DC think tank.

The American Rescue Plan Act, passed by Congress earlier this year, has enabled more childless workers to obtain the EITC. The legislation raised the income limit for adults to qualify and allowed workers aged 19 to 24 and those 65 and over to qualify in the 2021 tax year.

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Many of the workers who will benefit will be those who have worked in essential jobs, such as cashiers or home health aides, said Jessica Fulton, vice president of policy at the Joint Center for Political and Economic Studies.

Unlike the enhanced Child Tax Credit, where families have received advance monthly payments since July, any money owed to EITC workers will be included when they file their income tax returns next spring.

Eligible people might see larger tax returns next year, due to the fact that the credit amount has also been temporarily increased.

“The maximum credit has almost tripled to $ 1,500, which is a significant amount if people can get it back in their pockets,” Fulton said.

What the changes mean for black workers

Black workers and other workers of color in lower paying jobs generally tend to benefit from the EITC. But because the amount of credit is based on income, marital status and the number of children claimed, childless workers are at a disadvantage, according to research by the Joint Center for Political and Economic Studies.

The enhanced EITC will help provide income support to 2.7 million black workers without children. Millions of rural and Latino workers will also benefit from their new eligibility, Fulton said.

These workers risk being taxed into poverty, due to the fact that they must pay federal income taxes and payroll taxes that could reduce their after-tax income.

More than one million childless black adults between the ages of 19 and 65 are taxed into poverty or deeper poverty as a result of federal levies, the report says, citing the Center on Budget and Policy Priorities.

How credit could be improved

Certain aspects of the EITC tend to contribute to this problem, according to the report. For example, the maximum income for workers without children is too low. Meanwhile, adults without children under the age of 25 are excluded from the right to credit while their peers who have children are not.

Those who are parents but do not have custody of their children are also at a disadvantage because they cannot claim the credit.

For starters, the Joint Center for Political and Economic Studies is advocating for the EITC extensions put in place as part of the US bailout to be made permanent.

“Policymakers have made these decisions because it is the right thing to do, and we must continue on this path,” Fulton said.

In addition, the think tank is also advocating some changes that would help ensure that childless workers would also benefit from the credit. These changes include lowering the age of eligibility for credit to 18, increasing maximum income levels for working without children, and increasing the maximum benefit for adults without children.

“It’s really easy for people to ignore the difference this amount of money could make in someone’s life,” Fulton said.

“It will be a big boost in helping people take care of the things they need to take care of in the spring.”

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