Senators warn big bill would make credit harder to get for low-income families

State of play: The provision hasn't gotten a lot of attention, compared to changes to Medicaid and SNAP.

• Now some Democrats, led by Nevada Sen. Catherine Cortez Masto, are demanding Republicans cut it from the final bill.
• In a letter Thursday, addressed to Senate Majority Leader John Thune and House Speaker Mike Johnson, the Dems note that 20% of eligible recipients already miss out on the credit because they're unaware it exists or believe it's too complicated.
• The new changes, "only exacerbate the EITC's existing shortcomings by creating more red tape and complexity for workers hoping to claim the credit," they write. "This will lead to fewer eligible workers claiming the EITC, resulting in an effective tax increase on America's working families."
• Senators Michael Bennet (Colo.), Cory Booker (NJ), Tim Kaine (Va.) and Ron Wyden (Ore.) and a few others signed on.

The big picture: The provision is one of a handful in the bill that would impose more administrative hurdles for low-income Americans.

• There are new and expanded work requirements for Medicaid and SNAP, and a requirement that some adults re-certify for health insurance under the Affordable Care Act twice a year.
• Tax breaks for higher-income individuals and businesses do not appear to include any such requirements, which impose what some call a "time tax" on working people that ultimately winds up discouraging them from using benefits.

How it works: The bill directs the Treasury Department to establish a process for taxpayers to obtain a "qualifying certificate" for each child they're claiming under the deduction.

• It's not clear how the IRS — already struggling after staffing cuts under DOGE — would do this.
• The requirement would take effect in 2028.
• If taxpayers don't have such a certificate, they'd be denied the refundable portion of the tax credit i.e., the money they get back in their refunds.

By the numbers: On average, eligible taxpayers got a $2,743 from the credit in 2023, per IRS data, the most recent available.

• For tax year 2024, it was worth a maximum of $7,830 for families with three or more children.

What they're saying: "The IRS will need to handle potentially tens of millions of qualifying child applications, which will likely trigger a deluge of phone calls and requests for assistance," per a report from the Tax Law Center at NYU.

• "Taxpayers who fail to navigate the system successfully will not receive their credit, even if eligible."
• The provision is effectively a "backdoor cut" to the EITC, writes the author of the NYU analysis in a Substack post.
• "[The] bill would increase scrutiny and burden for low-income taxpayers even as its tax cuts for the wealthy have no similar requirements," writes Greg Leiserson, who previously was a senior economist in the Biden Council of Economic Advisers.

The other side: "Basic eligibility checks for government programs are not only a reasonable ask of beneficiaries, but a commonsense check against waste, fraud, and abuse," White House spokesman Kush Desai said in a statement.

• "It's both condescending and out-of-touch for so-called 'experts' to automatically assume that everyday Americans are either too stupid or too lazy to verify their income – as they do every day for a loan, credit card, or new lease application – when thousands of dollars' worth of government benefits are on the line."

Flashback: A provision like this was tried decades ago and was later abandoned because it deterred eligible workers from claiming the credit and was costly to implement relative to any savings.

• "Now is not the time to retest old ideas for reform that have already been attempted and failed," the senators write in their letter.