H.R.2764 - Tax Cut for Workers Act of 2025 (119th Congress)
Summary
H.R.2764, the Tax Cut for Workers Act of 2025, proposes to amend the Internal Revenue Code of 1986 to expand and make permanent certain modifications to the Earned Income Credit (EIC). The bill aims to provide tax relief to low- and moderate-income workers by adjusting eligibility criteria and increasing credit amounts. It also addresses the application of the EIC to U.S. possessions and allows taxpayers to elect to use prior year earned income in certain situations.
The key changes include decreasing the minimum age for EIC eligibility for individuals without qualifying children, eliminating the maximum age, and increasing the credit and phaseout percentages and amounts. The bill also includes inflation adjustments and extends the EIC to Puerto Rico, possessions with mirror code tax systems, and American Samoa, removing the 2025 sunset clause.
Expected Effects
The bill's passage would likely result in more low-income workers becoming eligible for the EIC, receiving larger credits, and having greater flexibility in calculating their credit based on prior-year income. This could lead to increased disposable income for these individuals and families.
The permanent extension of these modifications provides long-term certainty for eligible taxpayers. The expansion to U.S. possessions ensures consistent application of the EIC across different territories.
Potential Benefits
- Increased EIC eligibility for younger workers without qualifying children.
- Elimination of the maximum age limit, allowing older workers to claim the credit.
- Higher credit amounts and phaseout thresholds, leading to larger tax refunds.
- Flexibility to use prior-year income, benefiting those with fluctuating earnings.
- Extension of EIC benefits to residents of Puerto Rico, American Samoa, and other U.S. possessions.
Potential Disadvantages
- Increased government spending due to expanded EIC eligibility and higher credit amounts.
- Potential for increased complexity in tax filing due to new eligibility rules and income calculation options.
- Risk of improper EIC claims due to errors or fraud, requiring additional IRS oversight.
- Possible inflationary effects if the increased disposable income leads to higher demand without a corresponding increase in supply.
- The 'Tax Cut for Workers Act' title may be misleading, as the bill primarily expands an existing credit rather than creating a new tax cut.
Most Disadvantaged Areas:
Constitutional Alignment
The bill aligns with the Constitution's Article I, Section 8, which grants Congress the power to lay and collect taxes, duties, imposts, and excises to pay the debts and provide for the common defense and general welfare of the United States. The expansion of the Earned Income Credit can be seen as an effort to promote the general welfare by providing financial assistance to low- and moderate-income workers.
Furthermore, the bill does not appear to infringe upon any individual liberties or rights protected by the Bill of Rights. It does not establish a religion, restrict freedom of speech, or violate any other constitutional provision.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).