H.R.2898 - EITC Lookback Act (119th Congress)
Summary
H.R.2898, the EITC Lookback Act, proposes an amendment to the Internal Revenue Code of 1986. The amendment would allow taxpayers to use their prior year's earned income when calculating the Earned Income Tax Credit (EITC) if it results in a larger credit. This provision is intended to provide financial relief to individuals and families experiencing income fluctuations.
Expected Effects
The primary effect of this bill would be to provide a more stable and potentially larger EITC benefit for eligible taxpayers. This is especially relevant for those who experience temporary income reductions. The bill aims to reduce the impact of income volatility on EITC eligibility and credit amount.
Potential Benefits
- Increased Financial Stability: Allows families to maintain a consistent level of EITC benefits even with income fluctuations.
- Reduced Poverty: Provides additional support to low-income individuals and families, potentially lifting some out of poverty.
- Simplified Tax Filing: Offers an option that could simplify tax calculations for some individuals.
- Economic Stimulus: By increasing disposable income for low-income households, it could lead to increased spending and economic activity.
- Fairness: Addresses situations where a temporary income drop could unfairly reduce EITC benefits.
Potential Disadvantages
- Potential for Increased Costs: The lookback provision could increase the overall cost of the EITC program.
- Complexity: While intended to simplify, it adds another layer of complexity to the tax code.
- Risk of Improper Payments: Could potentially increase the risk of errors or fraudulent claims.
- Limited Scope: The benefit is limited to those eligible for the EITC and experiencing income fluctuations.
- Administrative Burden: The IRS may face increased administrative burden in verifying eligibility under the lookback provision.
Constitutional Alignment
The bill aligns with the Constitution's general welfare clause (Preamble). Congress has 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 (Article I, Section 8, Clause 1). The EITC, and by extension this bill, is an exercise of this power to promote the general welfare by providing financial assistance to low-income individuals and families.
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).