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Congress should oppose efforts to increase tax breaks for wealthy Americans and highly profitable corporations this year, 56 organizations across Alabama wrote in a letter sent to Alabama’s congressional delegation Wednesday. Lawmakers instead should seek to boost tax credits that expand opportunities for working people and families, the letter said.
“We urge you and all members of the Alabama delegation to reject renewed or expanded tax cuts for the wealthiest people in our society,” the groups wrote. “And we urge you instead to provide meaningful tax reductions for ordinary families in Alabama and nationwide through an expanded Child Tax Credit and expanded Earned Income Tax Credit.”
Alabama Arise is among 56 organizations that signed the letter to the state’s two U.S. senators and seven U.S. representatives.
You can read the full letter here.
‘An opportunity to address long-standing inequities with our tax code’
The Tax Cuts and Jobs Act (TCJA), enacted in 2017, increased federal deficits by nearly $2 trillion while lavishing tax cuts on the country’s wealthiest households. The law failed to live up to proponents’ claims that it would pay for itself or fuel wage increases for most workers, the organizations’ letter said.
Many TCJA provisions are set to expire this year, including numerous tax breaks that disproportionately benefit wealthy people. These include higher estate tax exemptions and a cut to the top marginal income tax rate. Other provisions are permanent and not up for renewal, including a 40% reduction of the corporate income tax rate. This tax break overwhelmingly benefits large, highly profitable corporations.
Proposals to renew and expand these tax breaks would be similarly skewed in favor of the wealthiest Americans. The White House’s proposed tax plan would lead on average to “a tax cut for the richest 5 percent of Americans and a tax increase for the other 95 percent of Americans,” according to the Institute on Taxation and Economic Policy (ITEP), a nonprofit tax policy research organization in Washington, D.C.
Lawmakers will have an opportunity during this year’s federal tax and budget debates to choose a better, more inclusive path, the Alabama organizations wrote.
“The expiration of these provisions [is] an opportunity to address long-standing inequities with our tax code and to raise more revenue to meet our country’s current obligations and address critical unmet needs,” the groups wrote.
Child Tax Credit, EITC improvements would reduce poverty, expand opportunity
A key TCJA provision that helped working families is also set to expire: an increase of the maximum Child Tax Credit (CTC) from $1,000 per child to the present $2,000 per child. Boosting the CTC is a proven way to ease suffering and expand economic opportunity, as 2021’s temporary CTC increase showed.
Congress in 2021 expanded the CTC for one year under the American Rescue Plan Act. The expansion increased the maximum credit for children under age 6 to $3,600, and for all other children to $3,000. It made the full CTC available to children living in families with low or no earnings. And it extended the credit to 17-year-olds, who previously were ineligible.
The benefits were swift and powerful, Census data showed. CTC payments helped families cover rising costs for necessities like food, utilities, rent and diapers. Overall, the policy kept more than 5 million Americans above the poverty line. It also contributed to a major nationwide reduction in the child poverty rate in 2021, with the Supplemental Poverty Measure for children falling from nearly 10% to about 5%.
Temporary improvements to the Earned Income Tax Credit (EITC) in 2021 also eased hardship for people across Alabama. More than 280,000 Alabamians with low incomes benefited from the one-year EITC expansion. Nearly three in four had incomes below $20,400, according to ITEP estimates.
“No matter what you look like or where you’re from, we all believe in caring for our families and community,” the organizations wrote to Alabama’s congressional delegation. “Americans want you to meet the moment and put the future and well-being of all of us ahead of tax cuts for the wealthy and well-connected.”
