By Alan K. Ota

Law360 (May 11, 2020, 5:21 PM EDT) -- Democrats aim to broaden the earned income tax credit to help low-income workers deal with work restrictions and financial setbacks as they develop new legislation to counter economic fallout from the COVID-19 pandemic.

House Ways and Means Chairman Richard Neal, D-Mass., vowed to promote a Democratic proposal for an expanded earned income tax credit for workers without children for at least two years in emerging virus relief legislation in the House. Supporters say the proposal would provide support to low-income workers as part of a broader package of aid for state and local government, the U.S. Postal Service and frontline workers in health care, transportation and other key sectors.

A similar measure was omitted from the Coronavirus Aid, Relief and Economic Security Act signed by President Donald Trump in March.

"We're still pushing," Neal told Law360, referring to his efforts to advance an expanded refundable EITC to workers without children in the next virus relief bill.

The House Democratic draft proposal would more than double the $538 refundable EITC cap — or maximum credit amount — for workers without children, and would expand eligibility for benefits including coverage of workers aged 19 to 66 — instead of 25 to 65 — for 2020 and 2021.

A similar proposal to expand the refundable EITC for 2019 and 2020 for workers without children was projected by the Joint Committee on Taxation to cost about $30 billion over 10 years. That earlier proposal was included in H.R. 3300, the Economic Mobility Act of 2019. At the time the legislation was proposed, Democrats were pushing to expand benefits for low-income workers and potentially curb business tax incentives under the 2017 Tax Cuts and Jobs Act  and Republicans opposed such changes.

Now, both parties agree that low-income workers face challenges from pandemic restrictions and the risk of virus exposure in service-related jobs. But they disagree on the form and timing of any new tax proposals or other types of virus-related assistance to follow up on the CARES Act, with Democrats promoting tax measures for families and some Republicans backing business incentives.

While Democrats push to broaden the EITC with or without revenue-raising offsets, Republicans are calling for a more deliberate approach to gauge the impact of the CARES Act before reshaping a tax incentive created under President Gerald Ford in 1975  to fight poverty and provide an alternative to traditional welfare programs. The EITC was extended to workers without children in 1990.

Sen. Bill Cassidy, R-La., a member of the Finance Committee, said he was exploring ways to help low-income workers, but was undecided about a broader refundable EITC for workers without children.

"I have to think that through," Cassidy told Law360, referring to House Democrats' two-year proposal.

Like Cassidy, Sen. Todd Young, R-Ind., another Finance member, made clear that he would need to study the details of any proposal before taking a stance. But he also told Law360 that he had questions about whether an expanded EITC for workers without children could be "the wrong tool for the current moment."

Chuck Marr, senior director of federal tax policy for the Center on Budget and Policy Priorities, said Neal's initiative could draw support as a way to reward low-salaried workers for providing essential services.

"Many low-wage workers who grow food, deliver food, cook meals and work as cashiers are too often invisible," Marr told Law360. "Now, it's becoming clear just how essential they are. It's standing out now. The expanded EITC is to recognize they do important work and to raise the pay for that important work."

Some tax experts say that a temporary expansion of the incentive also could help to prod a legion of nonfiling, EITC-eligible workers to file returns and claim incentives they have earned. Last February, IRS Commissioner Chuck Rettig estimated that a fifth of the eligible taxpayers either failed to file returns or omitted EITC claims from their returns last year, when he said about 25 million taxpayers received more than $60 billion in refundable EITC payments, or about $2,400 apiece.

Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center, said an expanded EITC could help to strengthen links between the Internal Revenue Service and low-income workers, ensuring they receive tax incentives and virus-related aid such as potential future economic impact payments.

"Including them in this piece of the safety net will provide ongoing and important support," Maag told Law360 in an email.

But Robert Rector, a senior research fellow at the Heritage Foundation, voiced concern that expanding the refundable EITC for workers without children could encourage some single fathers to continue living on their own rather than getting married and living with their children.

"It will cause the continuing disintegration of American families. It harms children. It harms mothers. It harms society," Rector told Law360.

For their part, supporters argue more workers without children will fall below the federal poverty level of $12,760 without a temporary EITC upgrade. Whether efforts to advance such an EITC patch make headway or not, some lawmakers in both parties have been looking to build bipartisan support for other tax measures to help low-income workers cover basic needs.

For example, Sen. Sherrod Brown, D-Ohio, a senior member of the Finance Committee, has been working with Cassidy to rally bipartisan support for his COVID-19 Earned Income Act proposal, S. 3542, to allow low-income workers to receive more generous tax benefits by using their income in 2019 — instead of reduced income in 2020 — as the basis for 2020 EITC claims.

Cassidy said he backed the Brown bill to try to help low-income workers make up for lost wages.

"The EITC workers may have had an income interruption this year. We should really base it upon what they had done in the previous year," Cassidy told Law360.

In the House, Rep. Brian Higgins, D-N.Y., has been promoting a similar measure, H.R. 6762, with a GOP ally on the Ways and Means Committee, Rep. Mike Kelly, R-Pa.

Brown predicted the legislation would have good prospects for inclusion in virus relief legislation.

"Many workers already work too hard for too little, and a lower EITC benefit as a result of the pandemic would be an unnecessary second hit," Brown said in an email to Law360.

--Editing by Tim Ruel and Neil Cohen.

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