Unhealthy Tax Changes for Families in Need
From a policy standpoint, the impact of December’s new tax legislation on working-class families is well documented. There is no shortage of analyses breaking down the “winners and losers.” Tax experts seem to agree that while the bill offers some short-term relief to middle-class families, such benefits will largely be erased when the new tax cuts expire in 2025. By 2027, according to the Tax Policy Center, 53 percent of taxpayers will pay more than they did this past year.
We are pediatricians, not tax experts. But we spend our days with working-class families that, in many cases, rely on tax credits to pay for medical care and other basic needs. In 2015, we decided to bring free tax preparation to these families in their doctors’ waiting rooms. This year, we worked with a couple thousand families. And what we’re hearing from our patients’ families should sound alarms for policymakers. Changes that are getting little play in headlines may impact far more than the financial well-being of our neediest families. Some of the changes that have gotten the least notice may have the greatest impact.
A New Index for the Earned Income Tax Credit
Since it was enacted in 1975, the Earned Income Tax Credit (EITC) program has helped millions of America’s working-class families meet basic needs. Numerous studies have shown evidence of the program’s effectiveness, linking the tax credit to greater participation in the workforce, increased lifetime earnings, and improved infant and maternal health.
According to the Center on Budget and Policy Priorities, the Republican tax bill indexes the EITC to a different measure of inflation — one that slows its growth over time and “erodes [its] value for millions of working-class people.” Unlike most of the bill’s changes, which expire in 2025, this one is permanent.
On the ground, the potential for unintended consequences looms large because the refunds provided by the EITC are often essential to families. They use this money to pay off debt, to catch up on rent and utilities, to stockpile food, to repair a car so they can get to work, and to go to the doctor. Consumers’ health-care spending increases by 60 percent in the week after they receive a tax refund. A mom in a clinic recently told us her older son was trying to eat less because he didn’t want to “waste” money. While we may not see the impact of this policy shift for years to come, the declining value of the EITC is already leaving critical gaps in access to medical care, healthy food, and quality childcare.
New ID Requirements for the Child Tax Credit
There was plenty of fanfare around the tax law’s expansion of the Child Tax Credit (CTC) to $2,000 per child from $1,000. But the law also includes a measure that would deny the CTC completely to children whose parents file with an Individual Tax Identification Number rather than a Social Security Number.
Nearly half of our patients are immigrants, many of whom don’t have Social Security Numbers. We don’t know how many of their parents are undocumented, but we do know they pay taxes. And this law denies them relief.
Eliminating the Personal Exemption
The new tax law repeals the personal exemption, which reduces taxable income by $4,050 for each taxpayer, spouse, and dependent in a household. Some lawmakers have argued that this repeal is a non-issue because of the new provision that doubles the standard deduction.
But while the personal exemption applies to all individuals (including children), the standard deduction only applies to taxpayers. We worry about the penalty that the elimination of the personal exemption will impose on single mothers, especially those with more than one child.
Perhaps more troubling, it seems the new tax legislation may be only the beginning. According to recent reports, some lawmakers are considering entitlement reform proposals that could, for instance, include work requirements for welfare recipients.
We agree that it’s important to increase financial stability by helping more out-of-work individuals find jobs. But many of the parents we see already do work full time — and it’s still not enough to get by. Even worse, they work odd hours and unpredictable shifts, and face punitive measures when they miss work for a sick child. They are disproportionately harmed by the butterfly effect of small policy changes.
We didn’t start this journey thinking that the details of tax policy were relevant for children’s health. But we’ve learned a lot about the impact of these policies on the parents and children we see every day. If we’re serious about building a stronger economy, about entitlement reform, and about the health of our nation’s children, then we cannot legislate away the programs protecting our future.
Lucy Marcil and Michael Hole are pediatricians at Boston Medical Center and the University of Texas at Austin, and co-founders of StreetCred, a non-profit that offers anti-poverty financial services to parents while they sit in pediatric waiting rooms. Marcil, named one of America’s 62 Jack Kent Cooke Graduate Scholars in 2008, is also a TED2018 Fellow. Hole was named to Forbes 30-under-30 in 2016.