The Republican majorities in the House and Senate are working to enact a massive budget and tax bill to advance the Trump administration’s pro-billionaire, anti-women agenda. Both the House-passed bill and the current proposals from Senate committees make drastic cuts to vital programs that families rely on, including cuts to Medicaid, nutrition assistance (SNAP, formerly known as food stamps), and student loan assistance in order to pay for new tax breaks for billionaires and mega-corporations.Yale’s Budget Lab recently estimated that the combined effects of the House-passed bill and the 2025 tariff increases would raise the incomes of those at the top 10 percent by over $12,000, while reducing incomes for the bottom 10 percent by over $2,000.
To distract the public from these egregious cuts, both the House and Senate versions of the bill include several tax provisions Republicans claim would provide families with tax relief. These include minor tweaks to the Child Tax Credit, expansions to tax benefits related to child care and paid leave, temporary tax exemptions on tips and overtime pay, a new savings account and private school voucher program, and several new or increased deductions. While some of these provisions would help some families, they would not reach the families who most need support, and several of them provide ways to further enrich wealthy individuals and businesses.
Overall, these provisions fall short of what families need, especially in the context of overall bills that prioritize the wealthiest, raise prices, attack immigrant families, and cut programs that families rely on.
The Bills Make the Refundable Credits More Inequitable, More Exclusionary, and Harder to Claim
Refundable federal income tax credits, like the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC), boost families’ incomes, increase the well-being of children and adults, and can help reduce racial, gender, and economic inequities. They are especially important for families with low incomes, who can receive the credit as a refund to the extent it exceeds their tax liability. Both the CTC and EITC were temporarily expanded in 2021, under the American Rescue Plan Act (ARPA). These expansions, which targeted low- and moderate-income families, helped millions of people make ends meet and helped cut poverty nearly in half. Restoring these expansions—especially the CTC—is incredibly popular with the public.
However, unlike the ARPA expansions, both the House and Senate bills’ changes to the CTC and EITC would not reach the families who most need support, and in fact would prevent many families from claiming the credits entirely.
The Child Tax Credit Expansions Would Leave Behind Millions of Low-Income and Immigrant Families
Both bills would expand the amount of the CTC. The House bill would temporarily expand the CTC from $2,000 to $2,500 per child for the next four years, and then permanently index it for inflation from the $2,000 amount. The Senate bill would permanently expand the CTC to $2,200 and index for inflation starting with tax year 2025. However, these increases would only benefit families who make enough money to already be eligible for the full credit. Under current law, 17 million children in low-income families do not benefit from the full CTC, including roughly 39 percent of Black children and 70 percent of children in families headed by single mothers. If either of these expansions become law, the families of those 17 million children would not receive even a dollar more in their tax returns from the CTC. In fact, roughly 5 million more children in moderate-income families would become newly ineligible for the full credit under the House-passed bill. In contrast, high-income families making up to $400,000 a year would get an extra $500 more per child under the House bill and an extra $200 under the Senate bill. In this way, the bill would actually make the CTC more inequitable.
The bill also takes eligibility for the credit away from millions of immigrant families. Under the 2017 tax law, one million children in immigrant families (many of them Dreamers) aren’t eligible for the credit. Both the House and Senate bills would make that restriction permanent and then go further. The House bill would further exclude 4.5 million citizen and lawful permanent resident children because they are in families in which one or more parents do not have a Social Security number (SSN). (Married families would be required to file jointly and to both have SSNs). The Senate bill would exclude 2.6 million citizen children because they are in families in which both parents (or a single parent) do not have SSNs. And so, not only would the bill not reach the millions of families who need the credit most, it would also exclude millions more families entirely.
The Bills Would Make It Harder for Families to Claim the EITC and Other Tax Benefits
Neither bill expands or improves the EITC in any way—instead both add burdensome documentation requirements that would make claiming the credit more difficult. Under both bills, beginning in tax year 2028, taxpayers who want to claim their children for the EITC must apply for a certificate for each qualifying child every year, and then wait for the IRS to determine if the taxpayer can claim the child. One in five eligible families already do not claim the EITC, and it is likely this paperwork requirement would increase that number, both by dissuading families from filing and by incorrectly denying some families the credit. A similar paperwork requirement piloted in 2003 significantly reduced how many families filed for the EITC.
Both bills would also eliminate a free program designed to make filing taxes easier. The Direct File program allows families to claim their taxes directly through the IRS easily and for free. This program, which has been very positively received by users, is especially beneficial for low-income families who are not required to file their taxes and may otherwise miss out on their tax benefits. Eliminating Direct File, on top of the new EITC certification requirement and the administration’s drastic cuts to IRS funding and staff, would make it more difficult for families to receive the tax benefits they deserve.
The Real Solution
We already know how to get money in the hands of the families who need support. Restoring the ARPA expansions to the CTC and EITC—as in the recently reintroduced American Family Act—would significantly reduce poverty and help millions of low- and moderate-income families make ends meet, amid rising prices and a tumultuous economy. Furthermore, protecting the Direct File program and fully funding and staffing the IRS would ensure that families could receive their tax benefits.
Tax Benefits Are Not the Solution to Our Child Care or Paid Leave Crises
Both bills expand tax benefits related to child care and paid leave, including the 45F Tax Credit for Employer-Provided Child Care and the 45S Employer Credit for Paid Family and Medical Leave. Additionally, the Senate bill improves the Dependent Care Assistance Program (DCAP) and the Child and Dependent Care Tax Credit (CDCTC). As millions of families struggle to care for their families without access to affordable child care or paid leave through their jobs, these expansions would do little to grow the supply of child care or the number of paid leave programs, increase families’ access to those benefits, or support early educators.
Employer Tax Credits Are Rarely Used and Benefit Big Employers
Both bills expand two tax credits that are intended to incentivize employers to establish benefits for their employees. The 45F Tax Credit for Employer-Provided Child Care allows businesses to claim a tax credit for offering their employees child care benefits, including onsite child care centers, slots or spaces at child care programs, or contributing to child care centers or resource and referral agencies. And the 45S Employer Credit for Paid Family and Medical Leave similarly allows businesses to claim a credit for offering their employees qualifying paid families and medical leave benefits.
Both of these credits require employers to incur substantial costs when offering benefits to employees, and so are rarely used. For the 45F credit for child care, the IRS estimated in 2016 that there were only 169 to 278 corporate income tax returns claiming $15.7 to $18.8 million in the credits. For context, this represents less than one percent of all corporate returns. Similarly, in 2020, only 1,230 firms across the country claimed the 45S paid leave credit. Even when employers do claim these credits, they are usually big, corporate employers who can afford or already provide these benefits to their employees. Since they have been implemented, these credits have done little to grow the supply of child care or increase workers’ access to paid leave, and have been especially likely to leave behind lower paid workers.
The DCAP and CDCTC Expansions Would Not Reach Families Who Most Need Support
The Senate version of the bill would expand the Dependent Care Assistance Program (DCAP). DCAPs are voluntary benefits that employers can offer that provide tax savings for employees who can afford to put money aside for child and dependent care expenses. DCAPs are mostly available to high-income earners in specific industries. Importantly, DCAPs do not provide more resources for care, limiting their usefulness for families most in need of help accessing and affording child care. The Senate bill would increase the amount that employees can contribute to their accounts, which would only benefit higher earners who have access to DCAPs in the first place.
Similarly, the Senate bill’s expansion of the Child and Dependent Care Tax Credit (CDCTC) would not reach the families who most struggle to access child care. The bill would modestly increase the size of the CDCTC, which helps some families cover some of their work-related, out-of-pocket child care expenses. However, under current law, families with low incomes receive little to no benefit from the CDCTC because the CDCTC is not refundable, and this expansion would do nothing to make the credit more available to those families. Additionally, even for families who would benefit from the proposed increase to the size of the CDCTC, the CDCTC would still be insufficient to cover the immense cost of child care.
The Real Solution
Tax benefits will not solve the child care or the paid leave crises. Direct child care investments are needed to grow the supply of child care, make child care affordable and accessible for all families, and ensure that early educators receive the increased wages, benefits, and improved labor protections they need and deserve.
Similarly, a national paid leave policy—like that created by the FAMILY Act—is needed to guarantee comprehensive, universal paid family and medical leave for working people to care for themselves and their families. We need to invest directly in families and communities, not rely on limited employer tax credits that mostly enrich large businesses.
The GOP’s “No Tax on Tips or Overtime” Plan Isn’t the Populist Win It Pretends to Be
Both bills include new tax deductions that would allow certain workers to exempt income from tips and/or overtime pay from federal income taxes. The House bill offers these deductions to families earning less than $160,000 annually. The Senate bill caps an individual worker’s deductions at $25,000 for tips and $12,500 for overtime; it also sets the income limit at $150,000 for the maximum deduction, but gradually phases out for workers with higher income levels. As workers across the U.S. are struggling to deal with rising costs and reduced public supports, President Trump and congressional Republicans have framed these exemptions as a way to help put money in the pockets of tipped workers and workers who put in long hours. However, these tax deductions would not solve the problems workers face or make workers better off.
These Exemptions Would Not Help as Many Workers as You Think
There are close to 5 million tipped workers in the U.S., including not only restaurant servers and bartenders but also hair stylists, nail salon workers, and some other service sector workers. Nearly seven in 10 tipped workers are women. However, exempting tips from taxes would do nothing for many of these workers. More than one-third of tipped workers have earnings so low that they are already exempt from income taxes. Even among low- and moderate-income tipped workers who do pay some income taxes, the tax savings from the reconciliation bills’ tax deduction would be small. But because of the perceived benefit of the tax exemption, both tipped workers and their employers would likely seek ways to increase the share of workers’ income that comes from tips—an inherently less stable income source than wages, and one that comes with an increased risk of harassment and discrimination from customers.
Similarly, exempting overtime from income taxes would not meaningfully help workers who work long hours. In fact, it would largely help employers, by allowing them to employ fewer people and make up the difference by working their employees for longer hours with less pushback. Employers would also be more likely just to tell people to work more hours—rather than offering wage or salary increases—in response to requests for higher pay.
The Exemptions Would Exacerbate Disparities Among Different Types of Workers
A tax exemption for tips would not help the majority of people with low and moderate incomes who do not work in tipped jobs but also struggle to make ends meet, such as child care workers, home health care workers, and retail workers, who are also mostly women and disproportionately women of color.
Similarly, the overtime exemption would create and increase inequities between workers able to work long hours (and can get a tax break on their overtime pay) and those who cannot (who would get nothing). This would especially impact those with caregiving responsibilities, who are disproportionately women.
The Real Solution
If congressional Republicans really cared about increasing pay for tipped workers, they would raise their wages. Raising the minimum wage for everyone and requiring employers to pay all workers at least the regular minimum wage before tips would increase incomes for millions of families and working people across the country.
Additionally, policymakers could ensure that workers are paid wages that don’t require them to work excessive hours to get by, and expand the number of workers who are eligible for overtime pay in the first place. Strengthening our labor laws would also make it easier for workers to form unions, so that workers can negotiate fair wage and hours policies with their employer, tailored to the needs of their business and industry.
Savings Programs Are Actually Tax Shelters Skewed to Benefit the Rich
The bills include several provisions that ostensibly would help families save and provide for their children’s education and futures, including a new child savings account, a new private school voucher program, and an expansion of the 529 college savings plan. While families need support paying for college education and savings for their children’s futures, these provisions are heavily skewed toward high-income families and would operate as tax shelters for the rich.
Trump Accounts
Both the House and Senate bills include a pilot program for “Trump accounts” which would provide every child with an account with $1,000 at birth. This program at first glance seems to be modeled after an idea first proposed by economist Darrick Hamilton that has since been championed by Democratic Senator Cory Booker. Senator Booker’s Baby Bond proposal would narrow racial wealth disparities by initially providing $1,000 at birth and then providing subsequent payments of up to $2,000, with more money being given to children in families with low incomes. However, the budget and tax bills take this idea and strips it of much of its progressivity and potential to narrow wealth gaps.
First, to be eligible for a Trump account, a child must be a U.S. citizen and at least one parent must provide their SSN, which would prevent many children in immigrant families from benefiting. Additionally, after the initial $1,000 payment to every child, this provision would do nothing further for low-income children. Instead, families would be able to put $5,000 per year into each account, which could eventually be withdrawn subject to the capital gains tax rate, which is lower than tax rates on ordinary income. Low- and moderate-income families would likely not have the extra income to contribute to these accounts, certainly not on a yearly basis. Families would also be required to manage their own account investments, which will likely act as an additional barrier for families with low incomes. They also would benefit less from the savings of the capital gains rate than high income families, because they are already subject to lower tax brackets.
And so, these accounts would ultimately become a tax shelter for the rich, rather than a way for children from low-income families to grow wealth. As Darrick Hamilton stated, Trump accounts “will enhance, rather than reduce, inequality.”
Private School Voucher Program
Both bills include a federal voucher program, providing $20 billion over four years for scholarships to help families send their children to private and religious schools. While congressional Republicans champion the plan as a way to empower school choice for families, this program acts as an incredibly profitable tax shelter for wealthy individuals. The plan would pay dollar-for-dollar tax credits to people who donate to the scholarships, including through gifts of corporate stock. This would allow the donors to avoid paying capital gains on that stock—meaning they could actually receive a profit from their donations, a tax benefit of unprecedented generosity.
While the plan would enrich wealthy donors, it would not particularly help students. There are no guardrails in place to ensure this money goes to students who actually need it—the income limit is 300% of a given area’s median gross income, meaning most students in the U.S. would qualify. Moreover, research suggests school voucher programs do not actually increase achievement for students. Finally, since public schools’ funding relies in part on enrollment, diverting students to private schools would undermine the funding for public schools. Public schools are where the vast majority of children receive their schooling, which includes students of color, students with disabilities, students from families with low incomes, and students who are gender non-conforming. Unlike private schools, public schools must provide an education for all of these students and are required by law to provide a free and appropriate education for disabled students.
Education Savings Accounts
Both bills would expand the 529 college savings plan, which is a state-sponsored investment account that allows families to put away money for education expenses. The accounts have significant tax benefits: Withdrawals are exempt from taxation and the earnings grow tax-free. The bill would expand the number of expenses that would qualify for a withdrawal, including test fees and home-schooling materials.
Both the plan and the bills’ expansion of the plan are skewed heavily to higher-income households. Low- and moderate-income families are unlikely to open plans, because they do not have extra money to contribute to savings accounts. And because lower income families are in lower tax brackets, the value of the tax-free withdrawals is smaller than for higher income families. Additionally, higher-income families who can already afford to put extra income into savings can use these accounts as tax shelters, opening them for multiple children or grandchildren and building significant, tax-exempt savings.
The Real Solution
To actually invest in the education and futures of this country’s children, we have to raise revenues from the wealthy rather than providing them with profitable tax shelters. Taxing the rich their fair share would provide more revenues to invest in basic needs programs, public education, and progressive tax benefits like refundable tax credits and Senator Booker’s Baby Bond proposal, which would help reduce gender and racial disparities and provide families with the support they need to thrive.
New Deductions Do Not Offer the Relief Families Need
The bills provide two new tax deductions: a tax benefit for filers who are 65 and older–structured as a $4,000 deduction under the House bill and a $6,000 personal exemption under the Senate bill–and a maximum $10,000 deduction for car loan interest on cars made in the United States. However, in the face of rising prices and economic turmoil from President Trump’s tariffs, these deductions would not provide the relief that seniors and families need.
Deductions Provide Limited Benefit for Those Who Need It Most
The new deductions may help some seniors and some taxpayers with car loans, especially as tariffs drive up the price of cars. However, unlike refundable tax credits, tax deductions are only beneficial to families and individuals who have enough income to have tax liability. This prevents many low-income families from benefiting from deductions, including many seniors who are living on lower incomes in retirement. Older women of color are especially likely to live in poverty, and so many would see no benefit from the senior deduction.
Additionally, tax deductions are also worth more for households in higher tax brackets. And so, even though both of these deductions have income limits, they would most benefit those at the high end of those limits—not those at the bottom of the income scale who are most impacted by tariffs, rising prices, and the steep cuts to Medicaid and SNAP.
Deductions Would Not Provide Help When Families Need it Most
Families and individuals would only receive any benefit from these deductions at the end of year after they file their taxes. These deductions would not help them with the rising costs of groceries, child care, and housing throughout the year. Moreover, those hoping to claim the car loan interest deduction would only know their car interest amount for certain at the end of the year, which would make it difficult to know if they would receive the credit before they purchase the car.
The Real Solution
Some seniors and families would benefit from these new deductions, and from the bills’ increase of the standard deduction. But these benefits would not reach those who are hit most by rising prices and would not make up for the harmful budget cuts being proposed to pay for the tax bill. The real solution is to expand the refundable credits that benefit families with low incomes, increase funding for programs that help families and seniors afford the basics, make long-overdue investments in areas like child and elder care, and make the wealthy and big corporations pay their fair share in taxes to pay for it.
The Bill Pointedly Excludes Immigrant Families from “Pro-Family” Provisions
Nowhere is it more obvious that these tax provisions are not truly intended to be “pro-family” than in both bill’s consistent, pointed exclusion of immigrant families. Immigrant families without SSNs are excluded not only from the CTC, but from every new tax benefit the bill introduces. This comes within the context of a bill that targets immigrants for deep program cuts–including restricting or eliminating immigrant access to Medicaid, SNAP, and Affordable Care Act (ACA) advance premium tax credits—and in the context of an administration that has targeted immigrants with threats of detention and deportation from day one. Excluding immigrant families from tax benefits is simply another pointed, political attack on families who help sustain our economy.
Immigrant Families Contribute Significantly to Our Economy and Our Tax System
Immigrant women and families play a crucial role in the United States economy. Immigrant women make up 7.9% of the U.S. labor force, and a significantly higher share of the workforce in many vital occupations and industries like heath care, domestic work, and agricultural packaging and processing. Without immigrant workers, the U.S. economy would likely not have had as high rates of job growth and GDP growth during recent years, and ongoing immigration will be vital in sustaining labor force growth.
Additionally, immigrant families contribute significantly to the tax system. Undocumented immigrant families pay billions in taxes every year, using individual taxpayer numbers (ITINs), tax processing numbers available to those who are not eligible for Social Security numbers. These families paid $96.7 billion in federal, state, and local taxes in 2022 and contribute to programs like Social Security, Medicare, and unemployment insurance.
The Bill Excludes These Families From Benefits They Have Earned
Despite these families’ contributions to the tax system, they are largely excluded from basic needs programs and tax benefits, and this bill would worsen these exclusions. In addition to the increased restrictions on the Child Tax Credit, both the House and Senate bill would take away ITIN eligibility for American Opportunity Tax Credit—a maximum-$2,500 tax credit for qualified higher education expenses.
The bill would also prevent individuals with ITINs from benefiting from its new tax provisions intended to help workers and families. These provisions include the exemptions on tips and overtime income, the new deductions for seniors and car loan borrowers, and Trump accounts. Both bills also target noncitizens for a new excise tax on money sent overseas, such as individuals working in the United States who send money back to help support their families. The tax would cover more than 40 million people, including green card holders and nonimmigrant visa holders.
The Real Solution
Immigrant families should not be excluded from tax benefits or basic needs programs, but should be supported by policies that recognize their importance in the economy and the community.
These Provisions Are Not What Families Need and Do Not Alleviate Immense Harm of the Overall Bills
Congressional Republican leaders are using these tax provisions to draw attention from how deeply harmful, inequitable and expensive the Senate and House tax bills are. These provisions do little, if anything, to make the tax bill less skewed to the wealthy or offset the deep cuts the overall bill would make to Medicaid, nutrition assistance,and other essential programs that millions of families depend on.
Even taken on their own, these tax provisions do not provide the support that families need. They do not reach the families who are most struggling in today’s economy, especially in light of threatened cuts to key supports, the rising costs of groceries, child care, and housing, and the increases in costs to everyday goods most families will see from the President’s tariff polices. Many of these provisions provide incentives for businesses and tax shelters for the rich rather than investing in families and communities directly. And they exclude immigrant families to make a cheap political point, rather than recognizing and rewarding the contributions these families make to our communities, tax system, and economy.
If Republican leaders really wanted to help families, they would pass a budget that makes our tax code fairer by raising taxes on top earners and big corporations, which would lead to more meaningful investments in women, families, and our communities as a whole, and increase—not cut—programs on which women and families rely.