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Bipartisan Bill Would Loosen Refundable Credit Rules

Posted on May 12, 2020

A bipartisan group of lawmakers wants low-income workers to be able to use 2019 salary information when applying for the earned income tax credit and child tax credit for 2020.

The COVID-19 Earned Income Act (S. 3542), introduced in the Senate by Finance Committee members Sherrod Brown, D-Ohio, and Bill Cassidy, R-La., would allow low-income workers to claim a larger refundable credit if they earned more in 2019 than in 2020.

“We can’t let workers take a hit on their wages this year and then a second hit when they file taxes next year,” Brown said in a May 11 statement.

A companion bill was introduced in the House by Ways and Means Committee members Brian Higgins, D-N.Y., and Mike Kelly, R-Pa.

As the unemployment rate hit new heights, the lawmakers said they want a simple way for workers to receive a small benefit if they lost their job because of the pandemic. “Allowing workers the option to file their 2020 tax return using their 2019 reported wages is a simple step toward restoring the refund they typically earn and deserve,” Higgins said.

Separately, Democrats have been working to expand refundable tax credits like the EITC and child tax credit. A group of House lawmakers on May 7 asked House Speaker Nancy Pelosi, D-Calif., and Minority Leader Kevin McCarthy, R-Calif., to include the Working Families Tax Relief Act of 2019 (H.R. 3157) in the next coronavirus response package.

The bill would increase the tax credit for working families by up to 25 percent. The measure, which was also introduced in the Senate by Brown, Finance Committee ranking member Ron Wyden, D-Ore., and Democratic Whip Richard J. Durbin of Illinois, would make the child tax credit fully refundable. “The EITC is a success story because it encourages people to work, when it is safe to do so after the peak of the pandemic and provides a financial boost to low-wage workers and their families,” Democrats wrote in the letter.

Republicans stood in the way of expanding refundable credits last year during negotiations over a spending bill, arguing that they improved the EITC and child tax credit when drafting the Tax Cuts and Jobs Act.

Demands Meet Standstill

Although both parties have acknowledged the need for further legislation to help businesses and individuals deal with the continued fallout of the coronavirus, Senate Majority Leader Mitch McConnell, R-Ky., said May 11 that he hasn’t felt the urgency to act immediately on another bill.

Republicans have said a key component of the next bill would be to limit liability for businesses. Finance Committee member John Cornyn, R-Texas, said he is working on a bill to “address the anticipated lawsuit bonanza” once businesses start reopening.

Democrats, meanwhile, have made it a priority to fund states. Senate Minority Leader Charles E. Schumer, D-N.Y., criticized McConnell’s stance in a floor speech, saying that “now is a time for action — big, bold, continued action.” House committee leaders are drafting legislation, according to Schumer.

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