I had the pleasure of speaking last week at an AccountAbility Minnesota public policy forum about what’s at stake for Minnesota’s low-income families in the federal and state tax policy debates.
As you might expect, the fiscal cliff was a big part of the discussion. A lot is at stake here in federal deficit-reduction negotiations.
We have a history in this country of protecting the most vulnerable in big deficit reduction packages. But that’s not guaranteed in the current negotiations. How the current deficit-reduction plan is crafted will have long-lasting impacts.
Tax cuts are a big contributor to the growth in the federal deficit, and revenues must play a role in deficit reduction.
A balanced plan that includes significant additional revenues can set the country on a sustainable fiscal path without increasing poverty or hardship, or abandoning basic public functions that support economic growth and well-being of all Americans.
In contrast, an unbalanced approach that fails to include adequate revenues could lead to large increases in poverty and hardship, increase the number of Americans without health care, shift costs to the states, and leave the federal government unable to meet basic responsibilities.
The fine folks at AccountAbility Minnesota share our interest in federal tax credits for low-income families, including the Earned Income Tax Credit and the Child Tax Credit. A deficit-reduction plan that does not raise enough revenues puts these credits at risk. The Earned Income Tax Credit (EITC) is one of the nation’s most successful anti-poverty initiatives.
Cuts to the EITC could be devastating to the 350,000 working Minnesota families struggling to meet basic needs in this tough economy. And that could happen if Congress does not continue the recent improvements to the EITC and the Child Tax Credit that would otherwise expire this year. It could also happen if Congress chooses to make cuts in these credits if it tackles tax reform legislation next year.
As the fiscal cliff deadline draws nearer, federal policymakers on both sides of the aisle agree that the expiring tax cuts for middle-income Americans should be extended. It’s crucial that extending the recent improvements to the Earned Income Tax Credit and Child Tax Credit are also included in any such package.