Tax Credits for Illegal Aliens Hindered by IRS Failures and Those of the Illegal Aliens

By David North on October 26, 2021

On October 23, the Washington Post carried this woe-is-me headline: “Immigrant families struggle to access child tax credit payments”.

There is so much wrong with this coverage that it is hard to know where to start, but let’s begin with the first word in the headline.

“Immigrant” means aliens legally and permanently in this country. The people having a challenge getting the federal funds, as the Post story specifies, are not immigrants, they are illegal aliens. (The print edition headline called them “migrants”.)

Then there is the misleading notion of “tax credits”, which I must admit is in the law. The moneys paid to the illegal aliens (and others) are largely not refunds of tax owed. They are out-and-out subsidies to the families concerned, more like the payments we make to farmers than anything related to income taxes. (I am all for more tax credits for low-income families, provided they are here legally.)

The enormous impact on our budget of these so-called “tax credits” to illegal aliens has been spelled out by my colleagues Steve Camarota and Karen Zeigler (see here and here).

The Post story, while also ignoring the budget picture, focuses on a failing of the Internal Revenue Service, and totally ignores an equally significant failure by a large fraction of the illegal-alien population.

As background, the child tax credit system, which the Biden administration wants to expand, has always had a tie to the income tax system, unlike other welfare programs such as food stamps (now SNAP) and cash assistance. The government paid out the “tax credits” to those who had filed income tax returns and who had claimed one or more children as dependents. That arrangement, as opposed to food stamps, meant that there was no need for a national network of civil servants figuring out who was eligible and who was not. It also served the purpose of hiding a welfare program in the tax system rather than it being free-standing and obvious.

The tax credits concept blurred two different activities in the system; one was the refund of some income taxes to families with children who were actual taxpayers; their tax burden was thus decreased. The other arrangement was for direct payments made to families who filed returns, but did not owe any taxes. This long-standing arrangement was sweetened recently, on at least a temporary basis, throwing in an additional $300 a month for children five and under and $250 a month for those six to 17. This was done through the emergency Covid legislation.

Let’s get back to the two failings that caused the headline.

The problem that the paper dwells on is the slow issuance of an IRS document called the Individual Tax Identification Number (ITIN); this is the number used by illegal aliens when they file tax documents. Without an ITIN (or a Social Security number), an illegal alien cannot file a tax return, so illegals lacking an ITIN cannot secure the “child tax credits”. The IRS says that Covid-19 has slowed the issuance of these documents.

The other problem that the Post totally ignores is the fact that over the years many illegal aliens have not filed returns, as they were supposed to do, and did not get ITINs for this purpose. So many illegals are now being hoist by their own petards, and are not getting the benefits for which they would otherwise qualify.

A University of Michigan team, according to the Post, said that these payments were made in July to only 56 percent to those eligible with Hispanic names, compared to 69 percent for whites and 67 percent for Blacks. Since most residents of the nation with Hispanic names are here legally, the low participation rate mentioned above was weighed down by the illegal aliens not filing.

The Post should have told us that.