Why Cutting the Child Tax Credit Is Bad Policy

National Immigration Law Canter (NILC)

Nearly every year, members of Congress attempt to end the refundable Child Tax Credit (CTC) for workers who pay their taxes using an Individual Tax Identification Number (ITIN) instead of a Social Security number (SSN). This cut would affect workers who are ineligible for an SSN and therefore pay taxes to the federal government using the only means legally permitted—the ITIN. The CTC, as well as the refundable portion (the Additional Child Tax Credit, or ACTC) were enacted to help struggling families financially care for their children. The CTC has proven successful in preventing millions of children from sinking further into poverty.

Denying eligibility for the refundable portion of the CTC would:
Negatively impact hardworking low-income families
•    This is an attack on the children of hardworking ITIN taxpayers whose families pay more than $9 billion in payroll taxes each year.1
•    This cut would deny up to 4 million U.S. citizen children much-needed assistance for covering the costs of necessities, including rent, clothing, and food.2
•    This would halt needed support for over 2 million working poor families who pay taxes, including sales and payroll taxes.3

Betray the Latino community
•    This cut will hit Latinos hardest. Over 80 percent of those impacted would be Latino families.4
•    This cut will deepen poverty. There are now more than 15 million children living in poverty in the United States.5 Nearly forty percent of these children are Latino.6

Threaten children’s well-being
•    Any change will harm children—the very population the tax credit is intended to benefit. The CTC has successfully lessened child poverty. In 2009, these credits protected approximately 1.5 million children from falling into poverty.7
•    In 2011, children of immigrants—nearly 9 million children—accounted for 30.5 percent of all children in the U.S. in low-income families.8

Hurt the working poor
•    Over 50 percent of families using the refundable CTC earn less than $20,000 per year, over 60 percent earn less than $25,000 per year, and over 75 percent earn less than $30,000 per year.9
•    Nearly half of these workers are raising children on hourly wages of $10 or less.10
•    Eliminating the tax credit for these families will take an average of $1,800 from the low-wage families per year.11
•    Without this tax credit, families may not be able to pay for basic needs such as groceries, utility bills, or child care.

Compromise the economic recovery
CTC dollars help grow local economies and support businesses. Every additional dollar received by low- and moderate-income families has a 1.5 to 2 times multiplier effect,12 in terms of its impact on the local economy and how much money is spent in communities where these families live.

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1 Recovery Act: Individuals Who Are Not Authorized to Work in the United States Were Paid $4.2 Billion in Refundable Credits (Treasury Inspector General for Tax Administration, Ref. No. 2011-41-061, July 7, 2011) (hereinafter “TIGTA report”), http://www.treasury.gov/tigta/auditreports/2011reports/201141061fr.pdf, p. 12. According to this TIGTA report, in 2010, ITIN filers reported wages “of about $60 billion” (p. 12). When $60 billion is multiplied by the 12.4 percent payroll tax rate and the 2.9 percent Medicare tax rate, the result indicates that ITIN tax filers paid $9+ billion in payroll taxes in 2010.

2 Jeffrey Passel, Unauthorized Immigrants and Their U.S.-born Children (Pew Hispanic Center, Aug. 11, 2010), http://www.pewhispanic.org/2010/08/11/unauthorized-immigrants-and-their-us-born-children/.

3 TIGTA report, supra note 1, p. 4.

4 Jeffrey Passel, supra note 2 (in 2009, there were 5.1 million children under 18 with unauthorized immigrant parents); Latinos Oppose Changes to Child Tax Credit (National Council of La Raza, updated Mar. 18, 2013), http://www.nclr.org/images/uploads/pages/Latinos%20Oppose%20Changes%20to%20Child%20Tax%20Credit% 20Fact%20Sheet%20022713.pdf, fn. 3.

5 Child Poverty by Selected Race Groups and Hispanic Origin: 2009 and 2010 (U.S. Census Bureau, Nov. 17, 2011), http://www.census.gov/newsroom/releases/archives/children/cb11-tps47.html.

6 Gabriel Velasco, Childhood Poverty Among Hispanics Sets Record, Leads Nation (Pew Hispanic Center, Sept. 28, 2011), http://www.pewhispanic.org/2011/09/28/childhood-poverty-among-hispanics-sets-record-leads-nation/.Briefly answers these questions: What is an ITIN? Why does the federal government issue ITINs? What is an ITIN used for? Do ITIN filers pay taxes? Why do undocumented immigrants pay taxes? What are the recent changes to the ITIN?

Facts about the Individual Taxpayer Identification Number (ITIN) (PDF)

FOR MORE INFORMATION, CONTACT
Ellen Battistelli, Policy Analyst, battistelli@nilc.org, or
Avideh Moussavian, Economic Justice Policy Attorney, moussavian@nilc.org