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

The Illinois state capitol complex in Springfield, Illinois.
The Illinois state capitol complex in Springfield, Illinois.(Mike Miletich)
Published: Mar. 14, 2022 at 7:01 PM CDT
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SPRINGFIELD, Ill. (WGEM) - Thousands of low-income people in Illinois received federal earned income tax credits and child tax credit payments through the American Rescue Plan. However, those credits ended Dec. 31 and Illinois lawmakers hope to fill the void before spring session ends.

3.6 million people in the state receive an earned income tax credit from Illinois right now. A proposed tax equity initiative could offer that targeted tax relief to 1.2 million more 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.

“This has been proven to affect poverty,” Ammons said. “This is an anti-poverty policy that we know works, we know gives people direct relief. And we have to do the right thing in the state of Illinois to make it effective and permanent.”

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

2.2 million children were eligible to receive an average child tax credit of $418 through the American Rescue Plan. But, Illinois doesn’t have that credit in place at the state level. The idea endorsed by over 100 organizations across the state could create a child tax credit of up to $600 for all EITC eligible families with dependents under 17.

Yet, the child tax credit would be delayed until the second year of the policy. The child tax credit could then be expanded for families without income in the third year of implementation.

Sponsors say this tax cut could be the best option for families still struggling to get by due to added financial burdens during the COVID-19 pandemic. Ammons said House Bill 4920 could boost the earnings of qualified workers and families who qualify, giving them money to put right back into local economies.

“We want our families to be able to make it through the next several months and next several years and permanently get out of poverty. We don’t have to have a poverty system,” Ammons said. “It is not necessary.”

The Center for Tax and Budget Accountability says this plan would cost about $415 million. That factors out as 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 advocates during a legislative briefing Monday afternoon.

While there is an identical piece of legislation, Senate Bill 3774, the House version has over 50 co-sponsors and could move quickly. The East St. Louis native said the credit helped her pay bills on time.

“It helped me to provide the essentials that my kids needed,” Hicks said. “I was really struggling, as far as how to go about doing those things when the pandemic hit, due to a shortage of hours, and you know, less work.”

Allison Flanagan is the CTBA 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 put $105 million of ARPA funding towards the EITC expansion in the Fiscal Year 2023 budget. Her organization estimates Illinois could use $268 million of the ARPA dollars in FY 2024 and $415 million in FY 2025. Flanagan said there is a way to fund the expansion without putting new burdens on the state’s current revenue stream.

“It not only helps the households,” Flanagan said. “Those households then go out into the economy and spend in their local community. They might spend it at a grocery store or the corner store. That, in turn, boosts the local economy because that provides income for a business owner or a salary for a worker. So it continues to ripple in the economy.”

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

She also suggested the state could eliminate several “ineffective corporate tax loopholes” including a cap on discounts for retailers and a limit on tax credits for private school scholarships. CTBA analysis shows eliminating those tax credits could generate roughly $266 million annually for the General Revenue Fund. Annual revenue growth for the state is also factored into the best options to pay for this plan.

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