How a Good Little Migration Policy Idea Got Twisted in the Budget Process

By David North on June 2, 2017

Deep down inside this article there is a significant piece of good news, but its birth story is like that of a baby chick having to fight its way out of a particularly thick eggshell.

Let's tell the story in reverse chronological order, because that is the way I encountered it.

In the New York Times corrections section, now buried deep in the first section on p. A21 (scroll down this page for the web version), on Wednesday, May 24 we learned:

An article on Tuesday about President Trump's budget proposals, using information from Mike Mulvaney, the White House budget director, misstated a proposal to bar undocumented immigrants from receiving certain tax credits.

A Social Security number is already required to claim the Earned Income Tax Credit. The proposal would impose this requirement for the Child Tax Credit, and the Child and Dependent Care Credit is not affected.

The Times more or less pinned the error on the rookie budget director, but it could have caught the error had it done its homework. Further, note the paper's use of the word "impose".

The item that needed correction appeared the day before in the Times and included this:

Welfare programs: ... It [the budget document] also proposes $40 billion in savings [over ten years] by barring undocumented immigrants from collecting the child care tax credit or the earned-income tax credit.

I must admit that one of the underlying problems is the complexity of the tax code. There are four program components that give both refunds of taxes paid and/or additional cash payments to working families with both low incomes and children:

  • Earned Income Tax Credit;
     
  • Child Tax Credit (a refund of taxes withheld);
     
  • Additional Child Tax Credit (cash payments of as much as $1,000 per child over and above the Child Tax Credit); and
     
  • Child Care Tax Credit (for assistance with day care costs).

Further, the children who cause the payments need a SSN for the EITC program, but can secure benefits in the Child Tax Credit program without that number.

It is no wonder that both Director Mulvaney and/or the Times got lost.

At this point I looked at the budget itself, and found the following line in a table on "Mandatory Savings Proposals" (on p. 6): "Require SSN for Child Tax Credit & Earned Income Tax Credit".

To anyone but a student of tax law, that certainly sounds like there was to be a new requirement: You have to have a SSN to get EITC benefits. As a writer, I can see what happened; in a drive for brevity, accuracy was lost.

I went further, this time to p. 148 of the budget document and finally found an accurate and complete version of the proposal:

The Budget would ensure that only people who are authorized to work in the United States receive the EITC and CTC. Under current law, households who do not have SSNs that are valid for work, including illegal immigrants who use Individual Taxpayer Identification Numbers [ITIN], can claim the child tax credit, including the refundable portion. This proposal would also fix gaps in the current administrative practice for EITC filers that allowed some people who have SSNs that are not valid for work to still claim the EITC. Since the EITC is a work support, only those people who are lawfully eligible to work in the United States should be able to claim it.

The last sentence was news to me. Apparently, under the current system, aliens who secured temporary SSNs as students or as foreign workers have kept using those numbers after they dropped out of legal status and the IRS has done nothing about it (except to send out checks).

What was not news to me — or more importantly to the Treasury Department's Inspector General for Tax Administration who has written strongly about the issue — is that a low-income worker could claim the Additional Child Tax Credit, without paying a cent in taxes, for children who did not have Social Security Numbers because they were not here in legal status. Such children could be given another Treasury number, the ITIN, and the parents could use that number in the Child Tax Credit program, as we reported earlier.

A Day Late and a Dollar Short. On this issue of denying benefits for those lacking SSNs, we might rephrase it to: 90 days late and $4 billion short. (The Treasury IG has estimated that this is the amount of money wasted each year in this way.)

Had the Trump administration been more nimble, and more thoroughly staffed, it could have announced the no-refunds for people without SSNs in the first couple of weeks of its tenure. It would then have blocked most of this spring's incorrect refunds of $4 billion or so through the income tax system. But it did not do so.

Further, though what we have is now in the form of a budget proposal, which would imply a need for congressional action, there is no need for that. Treasury could simply announce a change in policy since the current practice — on the use of ITINS for Child Tax Credits — is an administrative decision, and thus is one that could quickly be reversed by a subsequent executive action.

The good news? Treasury has finally done something in writing indicating that it knows about, and plans to reverse, at least some of our previous wasteful policies of paying illegal aliens to stay in this country.