PRINCIPLES FOR REFORM
The Tax Alliance for Economic Mobility will support tax policies that embody the following principles:
- Inclusive, progressive and equitable: Policies will significantly increase benefits for lower-income households and households of color.
- Impactful: Policies will have a significant and sustainable impact on the relative economic mobility of lower-income households and households of color.
- Accessible: Where relevant and feasible, policies will include automatic enrollment features and low costs to maximize access by low-income households.
- Simple: Policies will be easy for everyone to understand.
- Transparent: Policies will include provisions that enable Americans to measure and track outcomes over time.
TAX CREDITS FOR LOW-INCOME WORKERS
The Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) provide crucial support to millions of families each year. They are well-targeted to reduce poverty, and are proven to encourage work and support children’s development throughout life. Unlike many other tax incentives that primarily benefit higher-income taxpayers, the EITC and CTC are well-targeted and progressive. They also are proven to encourage work and support children’s development throughout life. As a result, the credits do not need broad restructuring. Rather, reforms should focus on building on their successes by closing gaps in who the credits reach and improving their effectiveness.
POLICY REFORMS: HOMEOWNERSHIP AND HOUSING
One of the largest of housing tax expenditures is the Mortgage Interest Deduction (MID), a homeownership subsidy provided through the tax code. Spending on the MID dwarfs the entire budget for the Department of Housing and Urban Development (HUD), which funds low-income housing assistance and community development. The Tax Alliance has adopted a set of principles for reforming the MID, proposing to expand access for lower-income Americans, increase benefits for renters, help communities of color build wealth, and reduce subsidies for high-income households.
POLICY REFORMS: HIGHER EDUCATION AND CHILDREN’S SAVINGS POLICY
Higher education is a pathway to economic mobility, but existing higher education tax expenditures disproportionately benefit above-median income households, who own nearly 99% of all savings in tax-subsidized college savings accounts. The Tax Alliance has adopted a set of principles for reforming these tax expenditures, with the goal of increasing tax-based aid and college savings support for lower-income students, providing aid before expenses are incurred, increasing take-up, incorporating automatic enrollment features, and eliminating programmatic that disadvantage lower-income students.
POLICY REFORMS: RETIREMENT SECURITY
For low income communities and communities of color, financial insecurity in retirement is exacerbated by lower earnings over the course of their work history, and less access to employer sponsored retirement benefits. The Tax Alliance has adopted a set of principles for reforming existing retirement savings tax expenditures to expand access to subsidized accounts of lower-income Americans, subsidize the savings for these Americans, and make reforms to limit expenditures for high-income households.