Tax Equality for Immigrants: The Indispensable Ingredient for Remedying Child Poverty in the United States

Abstract

Both at the federal and state levels, tax credits have proved effective policy instruments to combat poverty, and they are at the heart of President Biden's massive initiative on childhood poverty. However, about one of every five children suffering poverty in the United States has an unauthorized immigrant parent and thus little or no access to tax credits. That is nearly two million children, and 85 percent of them are US citizens. Achieving historic reductions in childhood poverty thus will be impossible without remedying the eligibility exclusions and bureaucratic impediments that unauthorized immigrants face in the US tax system. All individuals who make money and reside in the United States are obliged to pay federal income taxes via a return filed with the Internal Revenue Service (IRS). For unauthorized immigrants and others who do not qualify for a Social Security Number (SSN) that requires an Individual Taxpayer Identification Number (ITIN). In this two-tier system, ITIN filers have the same income tax due as Social Security filers, but they do not receive the same credits. ITIN filers have never been eligible for the Earned Income Tax Credit (EITC) and some of their children were excluded from the Child Tax Credit (CTC) in the Trump administration's 2017 tax bill. Both credits are highly effective anti-poverty programs, providing immediate relief while also incentivizing work and earnings. The tax credits are the critical policy tool in Biden's American Plan for reducing child poverty, and they would be funded through the budget reconicilation legislation devised by Congressional Democrats in the summer of 2021. As summer drew to a close, ITIN inclusion was beginning to enter the discussion among advocates and legislators about the bill's detailed provisions. But eligibility is not the only barrier. Internal government monitors have repeatedly criticized the IRS for heavy-handed and inefficient practices that have placed undue burdens on ITIN taxpayers and that have hindered compliance with the law. The use of ITINs has plummeted in recent years from a high of 4.6 million returns in 2014 to 2.5 million in 2020. Prompted by the economic losses and the medical toll suffered by unauthorized immigrants during the pandemic and by their newly valued roles as “essential workers,” the federal government and several state governments have taken important steps to lessen the exclusion of ITIN taxpayers. The first federal stimulus package excluded not only ITIN holders but also their family members with SSNs. Congress extended eligibility to members of ITIN households with SSNs for the second and third stimulus checks. Meanwhile, California, Colorado, Maryland, New Mexico, Washington, Maine, and Oregon broke with the federal government and made ITIN filers fully eligible for their state EITCs, and as of July 2021 similar measures were under consideration in four other states. 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. Child poverty can only be attacked successfully if ITIN households receive equal access to federal and state tax credit programs. This can be accomplished if: Congress and state legislatures permit full eligibility for all EITC and CTC programs. Congress mandates reforms to the procedures for getting and keeping an ITIN that have been proposed in multiple reports to Congress by the Taxpayer Advocate Service, an internal monitor at the IRS. Immigrants’ rights advocates and other civil society organizations, with government support, undertake a multi-year campaign to encourage ITIN application and use. The IRS receives funding to support a greatly expanded ITIN program.

The COVID-19 Pandemic Contributed to Disparities in Housing-Cost Burden Among WIC-Participating Households in the Most Populous County in California

“…Finally, Spanish-speaking Hispanic households may have been less likely to receive the three federal economic impact payments (the stimulus checks). Undocumented immigrants, those who file using an Individual Taxpayer Identification Number (ITIN) instead of a social security number, and mixed immigration status families with an ITIN holder were initially ineligible for the stimulus checks [25]. It was only in December 2020, the end of the data collection for the Los Angeles County WIC Survey, that mixed immigration status families with an ITIN holder could qualify [25].…”

“…Undocumented immigrants, those who file using an Individual Taxpayer Identification Number (ITIN) instead of a social security number, and mixed immigration status families with an ITIN holder were initially ineligible for the stimulus checks [25]. It was only in December 2020, the end of the data collection for the Los Angeles County WIC Survey, that mixed immigration status families with an ITIN holder could qualify [25]. Finally, in February 2021, California voted to provide a stimulus payment of $600 to eligible undocumented taxpayers who were not able to receive the federal stimulus payments [26].…”

Who Uses the Social Safety Net? Trends in Public Benefit Use among American Households with Children, 1980–2020

“…Access to public benefits is also unequal based on immigrant status; immigrant families face unique challenges with respect to language barriers, the documentation status of parents, and mistrust and fear of those providing government assistance due to the "chilling effect" of immigration status (Haley et al 2020). Children in immigrant families are also overrepresented among families with low incomes in the U.S.: approximately 45 percent of children with an immigrant parent are low-income or poor (vs. 35 percent of those with U.S.-born parents), and approximately 20 percent of children living in poverty has an undocumented parent (koball, Moore, and Hernandez 2021;Suro and Findling 2021). Yet immigrant families are also underrepresented in the use of public benefits that are essential for child well-being (Bitler and Hoynes 2013).…”

“…2020). Children in immigrant families are also overrepresented among families with low incomes in the U.S.: approximately 45 percent of children with an immigrant parent are low-income or poor (vs. 35 percent of those with U.S.-born parents), and approximately 20 percent of children living in poverty has an undocumented parent (Koball, Moore, and Hernandez 2021; Suro and Findling 2021). Yet immigrant families are also underrepresented in the use of public benefits that are essential for child well-being (Bitler and Hoynes 2013).…”

Ready to Stay: A Comprehensive Analysis of the US Foreign-Born Populations Eligible for Special Legal Status Programs and for Legalization Under Pending Bills

“…In addition, the households of undocumented taxpayers, even those with US citizen children, are not eligible for anti-poverty programs, such as the Earned Income Tax Credit (EITC), Child Tax Credits (CTCs) in most cases, and relief under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (Suro and Findling 2021). The status quo contributes to child poverty and the second-class citizenship of the children of undocumented residents (Kerwin, Alulema, and Nicholson 2018; Ryo and Peacock 2019; Suro and Findling 2021).…”