Affected DACA recipients and their families stand to lose nearly 12% of their average annual income
Hundreds of thousands of immigrant workers who file and pay taxes would be excluded from critical federal tax credits under regulations being considered by the Trump administration, according to a new brief from the Institute on Taxation and Economic Policy (ITEP). Doing so would limit the effectiveness of some of the nation’s most important anti-poverty policies and create inequities for immigrant families who are contributing to the U.S. economy.
The U.S. Treasury Department announced late last year that it will release draft regulations seeking to reduce the federal tax credits claimed by certain immigrants and their families. The new brief examines the consequences of these restrictions for one of several affected groups: people brought to the country as children who have received Deferred Action for Childhood Arrivals (DACA). Specifically, it shows how this group would fare under the regulations’ two most significant restrictions, which would apply to the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC).
Key findings:
- 337,000 people who are either DACA recipients, or living and filing tax returns with DACA recipients, would be harmed by this policy change.
- The average affected DACA recipient has lived in the U.S. for almost 29 years.
- Only working families who file tax returns would be affected because the EITC and ACTC both require earned income as conditions of eligibility.
- Among families with DACA recipients, almost two-thirds of the people who would be harmed are U.S. citizens. More than half (56 percent) are U.S. citizen children and another 10 percent are U.S. citizen adults. In total, 188,000 U.S. citizen children would be harmed, along with 34,000 citizen adults.
- The harm to families’ financial wellbeing would be substantial. Among families with DACA recipients, the average affected family would lose $5,140 in tax credits per year—an amount equal to 11.7 percent of their annual income.
- The financial loss for these families would be even larger in states that use federal credits as the starting point in determining eligibility for state EITCs or Child Tax Credits. Immigrants and their families in as many as 30 states are at risk of seeing their state tax credits reduced unless state lawmakers act, as we explore in a companion brief.
