Income tax

Illinois lawmakers could expand earned income tax credit, create child tax credit

SPRINGFIELD, Ill. (WGEM) – Thousands of low-income people in Illinois have received federal earned income tax credits and child tax credit payments under the U.S. bailout. However, those appropriations ended Dec. 31, and Illinois lawmakers hope to fill the void before the end of the spring session.

3.6 million people in the state currently receive an Illinois earned income tax credit. A proposed tax fairness initiative could provide this targeted tax relief to an additional 1.2 million people.

Rep. Carol Ammons says 44% of all black households and 65% of Latino households in Illinois could be eligible for the earned income tax credit under her plan.

“It’s been proven to affect poverty,” Ammons said. “This is an anti-poverty policy that we know works, we know brings relief directly to people. And we need to do what it takes in the state of Illinois to make it effective and permanent.

Under the proposal, 40% of all Illinois would have a permanent tax cut. The plan would extend the EITC to young adults ages 18 to 24, anyone over 65, and undocumented immigrants.

2.2 million children were eligible to receive an average child tax credit of $418 through the US bailout. But, Illinois does not have this credit in place at the state level. The idea endorsed by more than 100 organizations across the state could create a child tax credit of up to $600 for all EITC-eligible families with dependents under the age of 17.

Yet the child tax credit would be carried over to the second year of the policy. The child tax credit could then be extended to families with no income in the third year of implementation.

Sponsors say this tax cut could be the best option for families still struggling to cope with additional financial burdens during the COVID-19 pandemic. ammons said House Bill 4920 could increase the incomes of skilled workers and eligible families, giving them money to reinvest directly into local economies.

“We want our families to be able to survive the next few months and years and get out of poverty for good. We don’t need to have a poverty alleviation system,” Ammons said. “It’s not necessary.”

The Center for Tax and Budget Accountability says this plan would cost about $415 million. That’s less than one percent of the money the state uses from the General Revenue Fund each year.

POWER-PACT IL Parent Leader Lettie Hicks benefited from the federal child tax credit earlier in the pandemic. She spoke virtually with other lawyers during a legislative briefing on Monday afternoon.

Although there is an identical law, Senate Bill 3774, the House version has more than 50 co-sponsors and could evolve quickly. The East St. Louis native said the credit has helped her pay her bills on time.

“It helped me provide the essentials my kids needed,” Hicks said. “I was really struggling to figure out how to do these things when the pandemic hit, due to a lack of hours, and you know, less work.”

Allison Flanagan is the CTBA’s Associate Director for Budget and Policy, working closely with the coalition of unions, community organizations and consumer protection groups calling for this change. She explained that lawmakers could earmark $105 million in ARPA funding for the EITC expansion in the fiscal year 2023 budget. Her organization estimates that Illinois could use $268 million of the dollars. from ARPA in fiscal year 2024 and $415 million in fiscal year 2025. Flanagan said there is a way to fund the expansion without placing new burdens on ARPA’s current revenue stream. the state.

“It doesn’t just help households,” Flanagan said. “These households then go into the economy and spend in their local community. They could spend it at a grocery store or at the convenience store. This, in turn, boosts the local economy as it provides income to a business owner or salary to a worker. So that continues to affect the economy.

Flanagan noted that Illinois could see a $1 billion impact on the economy by putting money into the hands of low-income workers.

She also suggested that the state could eliminate several “inefficient tax loopholes for businesses,” including a cap on rebates for retailers and a limit on tax credits for private scholarships. The CTBA’s analysis shows that eliminating these tax credits could generate about $266 million annually for the General Revenue Fund. Annual state revenue growth is also factored into the best options for paying for this plan.

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