Tax refunds are way less this year compared to last year. Some are getting no refunds are all! There is much consternation and gnashing of teeth. Low to middle income families – the ones who most benefit from Child Tax Credit and Earned Income Credit – often got huge refunds last year. And this year, well, they are finding their refunds are much lower.
Here’s what happened. Credits were temporarily raised very high in 2021 by Congress because of COVID. The government basically shoveled money to everyone because so many were hurting and out of work. They only did this for 2021. Now the credits are back to what they normally are.
In 2021 the income floor was set to zero and anyone 19 or older with qualifying low income would get it. Now they must have at least $2,500 in earned income and be 25-65 years of age.
In 2021 it was $3,000 per child ($3,600 for 6 yo or less) and was all refundable, and everyone got it. Now it’s a maximum of $2,000 per child and only some of it is refundable. And the $2,500 earned income floor applies here too now.
In 2021 it was $1,400 for every member of the household. Now there are no stimulus checks.
The difference in refunds for 2022 vs 2021 for families can be thousands of dollars less. Sometimes they have no refund at all.
An extreme example: A welfare mom with two kids under six and no income got at least $12,800 in 2021 (CTC. $3,600 x 2 = 7,200. Stimulus. $1400 + 3 = $5,600) and will get zero this year.
The problem is many are expecting their tax refunds to be equally large this year, and they won’t be.
Explaining exactly why we need an UBI to provide an income floor.