By: Eric Ruble
New research from USC Price School of Public Policy Professor Roberto Suro and Hannah Findling (MPA ’21) finds that expanding tax credit eligibility to undocumented immigrants could be a meaningful step toward reducing child poverty.
President Joe Biden says he plans to reduce childhood poverty by half through his Build Back Better plan and its included tax reform strategy. However, one-fifth of children living in poverty, the great majority U.S. citizens, are ineligible for incentives because of their parents’ legal status – and the administration has not yet committed to expanding key credits to working, tax-paying immigrants with U.S.-born children.
A path to “build back better”
Currently, the Earned Income Tax Credit (EITC) provides a credit for low- and moderate-income American citizens based on their marital status and number of children. The program incentivizes work by raising the amount of the credit as wages increase, up to more than $6,000 for an individual with three children.
In other words, the more someone works, the more money they will receive; but only people with Social Security numbers qualify for the program, thereby excluding undocumented immigrants, who can pay taxes using an Individual Taxpayer Identification Number (ITIN).
Suro and Findling argue that Biden’s plan must expand EITC eligibility to include ITIN filers.
Said Suro, “We’ve got this tool that works very well. The challenge is making sure that the people who need it most and benefit from it most are eligible for it.”
The research, published through Center for Migration Studies, an international think tank, points to states which have successfully started allowing ITIN filers to qualify for local EITCs. Colorado and California were the first states to do so in the summer of 2020. Since then, five additional states have done the same.
“Early evidence from California and Colorado suggests that ITIN inclusion could prove a highly effective means of reaching poor children with the benefits of a state EITC,” the research states.
During the research process, Findling spoke with people around the nation who are working to expand tax credit eligibility. In many cases, local lawmakers and advocates were unaware of similar fights occurring in other states.
“It was really exciting to talk to advocates across the country,” Findling said. “There are so many people working for change.”
States’ opportunity to act
Altering EITC eligibility is not a “silver bullet” in eliminating childhood poverty, clarified Suro, but it is a crucial step toward that objective.
“You have to see it in the context of a larger effort,” he said. “This is a fairly simple, narrow, targeted effort that would have a big impact in terms of the effectiveness of what you’re trying to do.”
Moreover, Suro suggests that such an action would allow lawmakers to improve the immigration system while largely dodging hyper-polarized politics surrounding citizenship.
“This can be fixed without addressing the parents’ immigration status,” Suro said. “This is a way of examining one of the results of a broken immigration system and fixing it with available tools.”
Findling believes it’s also a more realistic route for Democrats to pursue if they are unable to pass sweeping immigration reform.
“This is something that a lot of people can get behind and that makes a lot of sense, since it does focus specifically on taxpayers,” she said.
Notably, if Congress doesn’t expand eligibility, states can continue doing so.
Suro said “there’s a lot of momentum,” especially with California – home to 12% of Americans – involved. Findling said that momentum is critical because it can carry to other states and, perhaps, to the federal level.
“It starts a cultural shift in thinking about how ITIN filers are treated in our society,” Findling said. “When you’re in poverty, any amount of aid matters. States have the ability to get aid to people in need right now, so that’s absolutely something we should be doing.”
The pandemic highlights a need for reform
America is seeing the highest unemployment rate since the Great Depression in large part due to the COVID-19 pandemic, which also exacerbated and exposed problems undocumented immigrants have been dealing with for years. Economically, as Suro and Findling noted in their research, lowest-income workers and their families were often the hardest hit.
“These hardships are always present, but everything has just become more extreme in the last year and a half,” Findling said.
Los Angeles is home to an estimated 900,000 undocumented immigrants, many of whom live in dense, multigenerational housing where distancing is difficult. Additionally, because many undocumented workers are in service-based industries and are unable to work from home, they have often been far more exposed to the virus. In Los Angeles County, Hispanics account for 53% of COVID-19 deaths but are 48% of the population, according to the county’s health department.
“They do hard work for cheap, and it exposed them to death, and yet they kept going,” Suro said of immigrant workers.
As indicated by his new research, Suro asserts that expanding EITC eligibility is an immediate, common-sense action that can alleviate some of the financial burden the poorest people in America are enduring. Doing so, he says, should be viewed as an investment in the future of the country not unlike public schools. “Investments made to prevent children from growing up in poverty have enormous results when they reach adulthood,” he said.
Paying into a closed system
Undocumented immigrants live in a contradictory space where they cannot legally work but are required to pay taxes on any wages they earn. By being excluded from EITCs, they are being asked to pay for some benefits they cannot receive.
“Keeping them as a subset of the population is wrong on a moral level and detrimental to society as a whole,” Findling said.
Expanding EITC eligibility at the federal level, Suro and Findling argue, would open tremendous opportunities for the children of immigrants, allowing them to better pursue education and careers.
“These kids aren’t going anywhere,” Suro said, adding that any continued effort to exclude taxpaying immigrants from tax credits “flies in the face of other basic doctrine that we have in this country.”
Ultimately, say Suro and Findling, if Biden wants to dramatically cut childhood poverty, he and his administration must consider the 10.4 million people living here illegally, 60% of whom have been in the U.S. for at least 10 years, according to the Migration Policy Institute.
“It’s a really large segment of the population that’s being overlooked. You simply can’t hit ambitious goals like that while ignoring such a big chunk of the population,” Findling said. Changing EITC eligibility could provide a notably brighter future for millions of children. Moreover, action at the federal level may help the entire country recover from 18 months of economic turmoil while firmly acknowledging immigrants’ fundamental role in our society.
Associate Director, USC Sol Price Center for Social Innovation