Affected DACA recipients and their families stand to lose 13% of their average annual income
Lawfully present immigrant workers, including the “Dreamers” who were brought to the country as children, 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). The proposal would inflict significant financial harm on immigrant workers who are contributing to the U.S. economy, and on those workers’ U.S. citizen children.
The U.S. Treasury Department last week released draft regulations seeking to reduce the federal tax credits claimed by certain immigrants and their families. Estimates from the Treasury Department and outside experts suggest that a million people, or more, could be harmed by the regulations.
ITEP’s new brief takes a deep dive into 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), commonly referred to as the “Dreamers.” 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:
- 158,000 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 over 28 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, more than half of the people who would be harmed are U.S. citizens and most of those individuals are children. In total, 90,000 U.S. citizen children would be harmed, making up 57 percent of all affected individuals.
- The harm to families’ financial wellbeing would be substantial. Among families with DACA recipients, the average affected family would lose $4,560 in tax credits per year—an amount equal to 13 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.
“Congress had plenty of opportunities to strip these tax credits away from the Dreamers and other lawfully present immigrants, but it repeatedly declined to do that,” said ITEP research director Carl Davis. “Now we’re seeing the administration strike out on its own with this very harsh proposal, and if it somehow manages to survive a near-certain court challenge then a lot of American kids with immigrant parents are going to end up as collateral damage.”
