Thread: GOP targets immigrants in tax credit

politico.com
By DAVID ROGERS
1/12/12 12:17 PM EST

Video at link

It’s a Catch-22 that only Washington could conceive of—a small classic in this city’s divide-and-conquer politics.


As talks resume in Congress on paying for the payroll tax holiday, Republicans are proposing to find billions in savings by denying child tax credit refunds to working-class immigrant parents who lack a Social Security number proving they are authorized to work in the U.S.

The impact on Latino communities is far more severe than first advertised when the House approved the plan last month - and at first glance, the optics seem brutal for the GOP going into the 2012 elections, at a time when the Hispanic vote is growing.


Already, the air is filled with charges of Wall Street elitism and income inequality in the nation. And GOP frontrunner Mitt Romney’s wealth, Harvard pedigree and record as a venture capitalist have opened up a class divide in the GOP itself even as he has gone hard right of conservative rivals like Newt Gingrich and Texas Gov. Rick Perry on the question of immigration.


“Why Latinos? What does it mean the symbolism of targeting poor Hispanics?

What message does that send?” Eric Rodriguez, a vice president for research and legislation at the National Council of La Raza, told POLITICO. “This is a good piece of conversation we’re going to have with our community.”


But leading the charge for the GOP is no less than Texas Rep. Sam Johnson, an emotional icon for House Republicans because of his seven years as a POW in Hanoi during the Vietnam War. And armed with a Treasury report from this summer, the 81-year-old Air Force veteran has exposed a real Achilles heel for Democrats in using the tax code as an anti-poverty program.


Indeed, the past decade has seen a genuine explosion in the cost of refunds paid out by the government under the child tax credit, first created in the post-welfare reform period of the late 1990’s. The annual cost was less than $1 billion a year prior to 2001, when President George W. Bush greatly expanded the credit. And in 2009, President Barack Obama went a big step further by making it easier for lower income families—with little or no federal income tax liability—to still claim the refunds.


Treasury data shows that 21 million tax filers in 2011 claimed the refundable credits, which averaged about $676 per child and totaled $26.1 billion. That’s more than some cabinet departments spend annually, and represents a five-fold increase since 2002, when the cost was closer to $5 billion.

The tax credit itself, which Bush grew from $500 to $1000 per child, is immensely popular with middle-class households, reducing their tax burden and helping a working mother offset childcare costs, for example. For lower income families, the cash refunds—technically called the Additional Child Tax Credit (ACTC)— are also an income supplement and anti-poverty tool, much like the older, more established Earned Income Tax Credit.


One big difference is that a 1996 law specifies that the EITC refunds can only go to households where the wage-earner has a Social Security number. The child tax credit, enacted later and quite small when it started, was never subject to this restriction since its advocates argue that the ACTC is aimed at the child and the legal status of the parent should matter less.

That distinction is at the heart of the fight now and one harder to sell in this Congress given the rising costs and budget deficits.


In fact, as immigrant households have become more aware of the child credit benefit, a greater share of these dollars appear to be going to undocumented workers who pay taxes and now qualify—using Individual Taxpayer Identification Numbers or ITIN’s issued by the Internal Revenue Service.


Sorting through the data is fraught with peril. But a July report by the Treasury Inspector General for Tax Administration (TIGTA) found that ITIN filers are much more likely to seek the ACTC and the dollar value of refunds paid out to ITIN filers quadrupled between 2005 and 2010.


As much as $4.2 billion or 15 percent of the cash payments in 2010 went to parents filing their tax Forms 1040 without Social Security numbers. Adding fuel to the fire, TIGTA said that “the payment of federal funds through this tax benefit appears to provide an additional incentive for aliens to enter, reside, and work in the United States without authorization, which contradicts federal law and policy to remove such incentives.”


“Are you kidding me? A few hundred dollars in refundable credits is unlikely to have that outcome,” a senior Treasury official told POLITICO in response. But the White House has not jumped into the fight with the force that might have been expected, and Democrats are clearly fearful of being seen as condoning illegal immigration.


To bolster its case, Johnson’s office cites not just the EITC law but also Obama’s signature “Making Work Pay” tax credit in 2009, which also requires a Social Security number from at least one of the filers in the case of a joint return.

“Last year illegal immigrants bilked $4.2 billion from U.S. taxpayers due to a loophole with the refundable child tax credit,” the congressman said in a floor speech following the Treasury’s IG report. “With the dire need to cut government spending, I hope this simple fix gets a serious look as a way to stamp out waste, fraud and abuse.”


Faced with her own tough race in Missouri, Democratic Sen. Claire McCaskill—a co-chair of Obama’s 2008 campaign— quickly jumped on the report too in a September letter to the IRS. “While the total amount of payments to unauthorized workers is enormous, the trend lines are even more disturbing,” McCaskill wrote, and Senate Finance Committee Chairman Max Baucus (D-Mont.) joined with 11 Republicans on the panel is seeking more information from Treasury and the IRS.

It’s this political nerve Republicans have hit upon—and continue to hammer. But the economic threat is nonetheless huge for immigrant households and their children who are often U.S, citizens— having been born in this country with Social Security numbers of their own.


Hundreds of thousands could be pushed into poverty and the drain on the Latino community is easily double what was first predicted in the House debate last month.


The Joint Tax Committee and Congressional Budget Office confirmed to POLITICO that their 10-year-estimate in December was measured against a baseline that assumes both the Bush and Obama expansions of the child tax credit will expire after this year. That explains why the initial annual savings of $2.6 billion drop so precipitously, and the 10-year total is just shy of $9.4 billion.


These calculations are consistent with current law, since so much of the tax code since Bush is written on a temporary basis. But the result is to wildly distort the debate since it is almost certain a big part of the child tax credit will survive.


In anticipation of the talks now, CBO last week updated its score modestly last week, going from $9.4 billion to $10.3 billion. But the true 10-year impact is likely to be more than double that or about $22 billion to $24 billion according to independent experts. This is confirmed by Johnson’s office which said that the Joint Tax panel had earlier predicted that his bill could save $24 billion over 10 years if the Bush-Obama expansions were continued.


What’s often lost in these calculations is how much the same immigrants already generate for Social Security. And the Catch-22 is that low income workers without Social Security cards are being asked to do still more to help compensate a retirement system which already disqualifies them—because they lack the same cards.


For example, the Treasury IG report features one table showing that in 2010, 2.18 million ITIN filers collected about $4 billion in child tax credit refunds. Asked by POLITICO, TIGTA said the same filers reported $46.3 billion in wages or an average of about $21,240 per household.

Counting their employer contributions as well, that would indicate the same workers generated more than $7 billion in payroll taxes for Medicare and Social Security in 2010. And this means that Washington still comes out ahead on balance.


“Without a doubt you are going to find the population most affected is the Latino community,” Rep. Xavier Becerra (D-Cal.) told POLITICO. “These are folks who aren’t on welfare. These are folks who are working.”

“The child tax credit is premised on the notion that if you pay income taxes and you have kids, you qualify for a credit. The refund is included in this process because there are a lot of families who are working very hard for very little money.”


A member of the Democratic leadership, Becerra will have a seat at the table when House-Senate talks begin on the payroll tax bill. A broader coalition of labor and clergy groups joined with Hispanic organizations to protest the Republican plan in a letter to Baucus and Michigan Rep. Sander Levin, the ranking Democrat on the House Ways and Means Committee. And the U.S. Conference of Catholic Bishops has now become more involved as well.


“This is a prime example of the inconsistency in our immigration policies,” said Bishop John Wester of Salt Lake, Utah in a statement to POLITICO. “On one hand, we are deporting undocumented families at a record rate, but on the other we want to accept the taxes they generate and deny them, and their US-citizen children, any benefit for their economic contributions. As a moral matter, we cannot have it both ways.”

Read more: GOP targets immigrants in tax credit - David Rogers - POLITICO.com

“Why Latinos? What does it mean the symbolism of targeting poor Hispanics?

What message does that send?” Eric Rodriguez, a vice president for research and legislation at the National Council of La Raza, told POLITICO. “This is a good piece of conversation we’re going to have with our community.”

Really Mr Rodriguez, I bet you are also having the Earned Income Credit conversation with them. Here is a copy of an email I received from none other than Mr Silvester Reyes reminding so callled citizens to take advantage of the EIC credit due to them. However we all know who Mr. Reyes supports. He is an Illegal alien supporter and we all know that many people who are here illegally and have no SS # can obtain a FEIN # from the IRS.
Here is a copy of the email:

January 11, 2012 FOR IMMEDIATE RELEASE Jose Borjon, Director of Media Relations Claudia Ordaz, Press Secretary (c) (202) 225-2912 (c) (915) 258-3367

REYES REMINDS EL PASOANS OF EARNED INCOME TAX CREDIT AWARENESS DAY, ENCOURAGES THEM TO TAKE PART IN EITC Awareness Day is Friday, January 27th

EL PASO – Congressman Silvestre Reyes (D-TX) is raising awareness and reminding El Pasoans to take advantage of the Earned Income Tax Credit (EITC). Eligible individuals can make up to $5,751 extra in their federal income tax refunds through this program. "During these tough economic times, any extra money awarded through the Earned Income Tax Credit can help families pay rent, buy groceries, cover utility bills and handle other pressing needs," said Congressman Reyes. “I encourage eligible El Pasoans to take advantage of the EITC and those who may be unsure if they qualify should contact my office and speak to a caseworker.” The EITC is a refundable tax credit available to qualifying low-wage workers and their families. Anyone earning $49,078 or less from wages, self-employment or farming in 2011 could qualify. Many will qualify for the first time this year due to changes in their income, their marital status or parental status, according to the Internal Revenue Services. The agency estimates only four out of five eligible workers currently claim their EITC. Free help is available to EITC-eligible taxpayers. Individuals who want to prepare their own tax returns can visit Free File on www.IRS.gov. This free tax software and free electronic filing program will walk taxpayers through a question and answer format and help them claim the tax credits and deductions for which they are eligible. For more information please visit www.irs.gov/eitc.