Hillary Clinton's tax plan changes would help parents and low-income Americans: Here's how

ByJames Dennin

Families with children 4 years old and younger would get an additional $1,000 per child in tax relief under new additions to Democratic presidential nominee Hillary Clinton's tax plan, released early Tuesday morning

The announcement will effectively double the existing $1,000 child tax credit, so that parents with young kids will now receive $2,000 per child, one of a suite of tax cuts geared toward the middle class in Clinton's broader tax plan.

Clinton would also expand the "refundability" of the child tax credit so it can benefit all low-income families, even those that don't owe any income tax or currently earn too little to qualify. Non-refundable credits can only offset taxes owed — but refundable (and partially refundable) credits can actually result in the IRS writing you a check, even if you owe little or no tax.

How do these proposals fit into Clinton's broader tax plan?

At the second presidential debate, Republican presidential nominee Donald Trump cautioned that Clinton "is raising everybody's taxes massively" with her plan, a claim that fact-checkers disputed, noting Clinton's longstanding promise not to raise taxes on anyone making less than $250,000 a year

The Clinton campaign has said tax hikes on high earners will finance the cost of her plan, according to the Wall Street Journal.

Indeed Clinton's tax increases for top earners are one of the biggest differences between the Trump and Clinton plans. Her proposals include a surcharge on families making more than $5 million a year, closing obscure loopholes favored by hedge fund executives, like the Bermuda reinsurance loophole, and new expansions to the estate tax, levied against large inheritances.    

Trump's tax plan, in many ways, does exactly the opposite.

Trump would completely repeal the estate tax, which he and other Republicans pejoratively refer to as the "death tax." His plan would reduce the top tax marginal tax rate on the wealthiest Americans — making more than $413,201 filing singly — from 39.6% to 33%. He would also "significantly reduce" income and corporate taxes, according to an analysis from the conservative-leaning Tax Foundation. 

John Locher/AP

Because both candidates would cut taxes, each would add to the federal debt: While Clinton's proposal would cost around $200 billion, Trump's plan would increase the debt by about 26 times that amount, or $5.3 trillion, according to a report from the anti-deficit group Committee for a Responsible Federal Budget.

The timing of Clinton's announcement might not be a coincidence. 

In addition to trading barbs over their respective tax plans during Sunday's presidential debate, a new cache of documents from the group Wikileaks surfaced on Friday that some critics say paints Clinton as less progressive on issues affecting low-income Americans, like the national push toward a $15 an hour minimum wage. 

The new additions to Clinton's plan might now put some progressive minds at ease: Though Trump is offering tax benefits to offset child care expenses in the form of an income tax deduction, Clinton's credit is more generous.

That's because, while deductions simply reduce the amount of your income that is subject to tax, which is great for people in high tax brackets, credits directly lower your tax bill — or, in the case of refundable credits, can result in a net gain for you. That's an important distinction, the Tax Foundation's director of federal projects Kyle Pomerleau explained in an email to Mic. 

"A tax credit typically benefits lower- and middle-income taxpayers because their marginal tax rates are lower," he said. "In contrast, a deduction benefits higher-income taxpayers because their marginal rates are typically higher."

Indeed, Clinton's credit would help a small but needy group of people, Roberton Williams of the left-leaning Tax Policy Center said.

"It's a big deal if you've got little kids, that's when they're expensive," Williams said in a phone interview Monday. "If you're a very low-income family and you get an extra $1,000 per kid, that's a really good deal."

As Vox points out, Clinton's plan to expand the child tax credit specifically targets Americans living in extreme poverty, more so than the middle class. That is, arguably, is a big-deal gesture for more left-leaning voters who may feel Clinton is too moderate on issues of income inequality. 

Then again, it's unclear how much Clinton needs to move the needle at this point: The New York Times' Upshot blog currently has Clinton's odds of achieving the presidency at 87% as of Tuesday morning.