Which Tax Proposal is Better for West Virginia?
With a number of tax cuts set to expire at the end of the year, Congressional Republicans have called for extending one tax cut in particular, while endings improvements in tax credits for millions of low and moderate income working families.
As part of the 2009 stimulus bill, several improvements were made to the Earned Income Tax Credit (EITC) and the Child Tax Credit. These improvements were set to expire in 2010, and the Obama administration negotiated their extension with Congressional Republicans in exchange for a reduction in the estate tax (see here for details about the changes to the estate tax).
Now, with the tax changes again set to expire, Republican leaders in Congress have proposed extending the estate tax cut, but ending the improvements to the EITC and the CTC.
The 2010 estate tax cut only benefits heirs of estates with assets in excess of $3.5 million, $7 million for couples. Only 0.3 percent of estates receive the estate tax cut enacted in 2010, the estates of the other 99.7 percent are already exempt from the tax if policy returns to its 2009 parameters. Reverting back to the 2009 standards would only affect 7,450 estates nationwide, and less than 10 estates in West Virginia. Extending the tax break, however, would cost $119 billion over the next ten years.
In contrast, letting the tax credit improvements expire would affect more than 13 million families, with more than 25 million children. In West Virginia more than 77,000 families would be affected, with more than 128,000 children.
The impact of these families is substantial. For example, a married couple with three children with earnings at the 2013 poverty line ($27,713) will receive $1,934 less in combined CTC and EITC benefits next year if the improvements expire. A single mother with two children working full time at the minimum wage will receive a CTC of just $173 in 2013 instead of $1,725.
The boosting of these tax credits has had a big role in stimulating the economy, with a large bang for the buck, while the estate tax cut has done little to help the slow economy.
Policymakers are considering and already enacting cuts to education, infrastructure, heath care, and other programs that help not only the poor, but everyone in the country, in order to address our fiscal problems. Extending the costly estate tax cut for the wealthiest in the country while allowing tax relief for low and moderate income families and children to expire makes little sense, particularly for West Virginia.
(For 50 state data see here.)