The election is over, and it’s time for Congress to get down to business.
We know that the U.S. economy is getting better. The country added 171,000 jobs last month, but recovery is slow. Recent census data show that median household income is down, and income inequality has widened. In Maine, the number of unemployed people increased by 43 percent since 2007, and median income has declined by 7.7 percent — a drop of more than $1,500 over the last five years. That means less money in the pockets of working families to pay for food, housing, clothes and other necessities.
One thing is clear: Low-income, working families and their children should not take a hit when Congress returns next week to take up the pending expiration of the Bush-era tax cuts.
What a cruel joke it would be if Congress were to extend tax breaks for the richest among us but fail to extend critical tax credits that help working families hold their own. What Congress should do is allow tax cuts for the richest 2 percent to expire, extend tax cuts for those making less than $250,000 and extend the 2009 American Recovery and Reinvestment Act improvements to the Earned Income Tax Credit and the Child Tax Credit to help working families keep their jobs, contribute to the local economy and stay out of poverty.
The importance of the tax credits to working families cannot be overstated. These improvements almost exclusively help working people who earn $50,000 or less and have helped push back against the stagnant wages and reduced opportunity facing low-income families who are trying hard to do the right thing to take care of their families.
The Earned Income Tax Credit has been hailed as the federal government’s most successful anti-poverty tool. The 2009 expansion for families with more than two children strengthened its effectiveness by acknowledging the increasing financial need of larger families and targeting tax relief accordingly. Yet, if the 2009 improvements expire due to Congressional inaction, more than 15 million children could either lose the credit entirely or see a significant reduction in the amount their family receives.
The Child Tax Credit helps more than 35 million families each year meet their children’s basic needs and kept 1.4 million children out of poverty in 2010. If Congress fails to act, however, the credit will be cut in half — from a maximum of $1,000 per child down to $500 — and the qualifying income threshold will rise significantly, denying access to families with the lowest incomes.
Together, these credits kept almost 5 million children out of poverty across the country. Leading researchers at Citizens for Tax Justice estimate that 344,485 families in New England, with 635,081 children, would be negatively affected if these credits are allowed to expire. In Maine, 35,042 families, with 64,730 children, would lose a total of $21.5 million, or about $613 per family.
In Maine, 49,000 children live in poverty, and that number has increased 23 percent over the past five years. And another 19 percent (59,000) of Maine children live in low-income families and are at risk of falling into poverty. The refundable tax credits are essential to the economic stability of many families. They help keep tens of thousands of Maine children out of poverty by rewarding work and giving families the support they need.
Working families are the backbone of the economy in Maine and across the country. Our congressional leaders must take action to extend these important tax credits in order to help working families keep working, provide for their children and stay out of poverty.
Ned McCann is executive director of the Maine Children’s Alliance, based in Augusta.