Looking for our new site?

Time to Reduce Poverty

December 20, 2012 |
Solutions to avoid the fiscal cliff must not deepen poverty or punish children. Refundable tax credits are critical to working families and ingrained in our local economy. We should let high income tax cuts expire, preserve spending that matters, and retain solutions that help people enter and stay in the middle class. A bad deal will hurt our next generation and impoverish our future. Policy makers need to get it right.
Click here to read this full article.

We have the chance, right now, to make smart decisions that can stabilize families, raise resources from those most able to pay, and keep in place important programs that reduce poverty and build the middle class. As we navigate those choices, here are two novel ideas to keep in mind: don’t make a deal that increases inequality and don’t make a deal that impoverishes more children.

We should also strike a deal that raises additional revenue from those most able to pay, that keeps in place important spending which helps us provide good schools, an adequate safety net, decent health care, and extended federal unemployment, something we usually provide in times like these, when joblessness is too high.

Of special importance is preserving refundable tax credits designed to make work pay and help working parents. For some middle-class and poor working families, important refundable credits could vanish, sucking money out of communities. The two largest refundable credits, the Earned Income Credit (EITC) and Child Tax Credit (CTC), pumped nearly $3 billion into the Ohio economy in 2010 alone.

Created by President Gerald Ford in 1975 and expanded under every presidential administration since, the EITC is lauded for its direct impact in helping people stay in the labor market in hard times, lifting families with children out of poverty and sending federal dollars to local communities. The Child Tax Credit (CTC) supplements the EITC but also helps middle-income families offset the growing costs of raising children. The 979,000 Ohio families who received the EITC and the 665,000 who took the CTC spend much of their income and tax refund locally on food, clothing and shelter. That means these credits help support grocery stores, childcare centers in communities all over Ohio. Only working families – who pay taxes – are eligible for these tax credits. They pay state and local taxes as well as payroll taxes for Social Security and Medicare.

The 2009 Recovery Act temporarily expanded the EITC for families with three or more kids, expanded benefits for married couples with children, and improved the CTC. These changes lifted more people out of poverty and reduced the severity of poverty for approximately 7.3 million people. Preserving these refundable credits is essential to Ohio families. Without policymaker action, the EITC will reset to previous levels and reduce coverage for a million Ohio children.

As policymakers work to reduce the deficit, it is important that those changes do not increase poverty or inequality. And often the choice is easy: we could keep the federal estate tax low, enriching 7,400 high-income heirs nationally (few of whom are in Ohio) or preserve the CTC in a manner that would assist 13 million families and 25.7 million children across the country (including more than 500,000 working Ohio families ).

Solutions to avoid the fiscal cliff must not deepen poverty or punish children. Refundable tax credits are critical to working families and ingrained in our local economy. We should let high income tax cuts expire, preserve spending that matters, and retain solutions that help people enter and stay in the middle class. A bad deal will hurt our next generation and impoverish our future. Policy makers need to get it right.

Related Programs