By Ashley Burnside

As Congress works to advance the proposed budget reconciliation bill of 2025, CLASP’s series “The 2025 Budget Reconciliation’s Impact on People with Low Incomes” will examine the policies put forward that have particular resonance for children, families, and communities with low incomes. This is the fifth blog in the series.

On May 13-14, the House Ways and Means Committee met to mark up its portion of the reconciliation bill. The tax package that passed in 2017, which the reconciliation bill seeks to extend, was skewed to the wealthiest individuals and widened the racial wealth gap. Congressional leadership is using the same playbook now. The proposed tax package will continue to widen inequality by benefiting the wealthiest people and corporations by cutting critical health and nutrition programs that families rely on. It will also enforce harmful restrictions for families who file taxes with Individual Taxpayer Identification Numbers (ITINs), despite the fact that ITIN filers pay taxes and contribute substantially to our nation’s economy. No families should be left out of important tax credits simply because they don’t have a Social Security number.

Below, we take a closer look at some particularly harmful parts of the proposed bill.

CTC and Immigrant Children

The committee is considering changing the Child Tax Credit (CTC) so that only households where every member has a Social Security number would be eligible for the credit. In families where even just one parent has an ITIN, otherwise eligible children would no longer receive the CTC. This would restrict access to an estimated  4.5 million children who are U.S. citizens and legal permanent residents. The bill also permanently restricts children who don’t have Social Security numbers from accessing the CTC, which is estimated to impact 1 million children. 

All families who file a tax return and are otherwise eligible should be able to get the CTC, regardless of their immigration status. People with ITINs pay federal taxes — that’s why they have an ITIN number. This provision only perpetuates the myth that undocumented immigrants don’t pay taxes. In 2022, undocumented immigrants paid an estimated $59.4 billion in federal taxes and $37.3 billion in state and local taxes, totaling $96.7 billion. And in 40 states, undocumented immigrants pay higher state and local tax rates than the top 1 percent of households in the state.

CTC Leaves Behind Too Many Children

Policymakers have proposed raising the maximum CTC amount to $2,500 per child from tax years 2025 through 2028 and adjusting it to inflation. However, this will not address the equity gap in the CTC or most effectively reduce child poverty because children in families with very low incomes will continue to be left out of getting the full credit.

An estimated 17 million children don’t get the full CTC because their families don’t have high enough incomes. These children are disproportionately likely to be Black and Latino due to structural racism embedded within our nation’s labor market. In addition, 30 percent of children living in rural communities were not eligible for the full CTC because their families’ income was too low. If the maximum credit increases to $2,500 per child, an estimated 20 million children would not get the full credit.

Lawmakers should prioritize changes to the CTC that make the credit fully refundable and available to families with little to no earnings in the reconciliation package. This would be the most effective way to reduce child poverty. And there is precedent for bipartisan support for these reforms: Under last year’s Wyden-Smith proposal, lawmakers reached an agreement on CTC reforms that would have helped families with low incomes get a higher credit through increasing the credit available to families with low incomes and multiple children, and by removing the refundability cap.

Immigrant Eligibility for Health Programs
Undocumented immigrants are already restricted from coverage under the Affordable Care Act (ACA) and its premium tax credits, but the proposal goes further to restrict authorized immigrants from affordable health coverage. It establishes new restrictions for the Advanced Premium Tax Credit (APTC) for Temporary Protected Status (TPS) holders or individuals covered by or Deferred Enforced Departure (DED), individuals with humanitarian parole, or asylees or those with a pending asylum application.

This is significant because the APTC allows working-class families to better afford health coverage on the ACA Marketplace. Improved parental insurance coverage and health outcomes consistently benefit children in the short- and long-term through improved family health and financial security, just as a lack of health care coverage and the inability to afford medical costs lead to significant burdens on families.

Additionally, the bill strips Medicare coverage for older immigrants who have contributed to the program, often for decades, including TPS and DED holders, refugees, asylees, persons granted withholding of removal, individuals with humanitarian parole, and other immigrants authorized to be in the United States. People work and contribute to programs like Medicare with the expectation that they’ll have access to that support when they are older and retired. Pulling the rug out from under their feet will leave millions of older individuals and individuals with disabilities without coverage.

In addition to losing Medicare coverage and access to the APTC, the bill also strips coverage for lawfully present immigrants to even access the Marketplace coverage if they are under 100 percent of the federal poverty level, or roughly $32,000 for a family of four. This special exception was created because many lawfully present immigrants with low incomes are ineligible for Medicaid coverage. Removing this exception means that immigrants with low incomes would not be eligible for the ACA or Medicaid, denying them any pathway to affordable health coverage.

“No Tax on Tips” and “No Tax on Overtime” Policies
The bill’s attempt to prohibit tips from taxation is regressive and would reduce federal revenue. Workers who don’t pay federal taxes because they earn too little would largely miss out on the benefits of this proposal. The policy would affect payroll and income taxes by reducing what tipped workers pay into and get out of Social Security in retirement.

For its part, the “no tax on overtime” proposal would fully exclude overtime pay from federal income tax. Workers who earn too little to owe federal income tax—often people who are the lowest-paid and most economically vulnerable—receive no benefit at all, despite often working long or irregular hours. The proposal also assumes that all workers have equal access to overtime, but overtime opportunities are not evenly distributed. Workers in sectors like hospitality, caregiving, and retail, who are disproportionately women and people of color, often face unpredictable schedules and limited access to overtime. A truly worker-centered policy would expand access to overtime protections and provide refundable tax credits that reach workers regardless of income level or tax liability.

A Bill That Benefits the Wealthy
Republicans claim that this bill will help workers and families. But these proposed changes—along with tax breaks that reward ultra-wealthy corporations; proposals to exclude immigrant student borrowers and create financial incentives for students to pursue low-quality education programs; an end to the Direct File program; implementing complicated pre-certification requirements in the Earned Income Tax Credit; and punishing private postgraduate institutions that the Trump Administration considers too “woke”— make it clear that only the wealthy and corporations will truly benefit from the current version of the bill. The child care and paid leave provisions will not reach the people who would most benefit from them, and cannot compare to true investments in child care and paid leave.

If Congress votes to include these proposals in the final reconciliation bill, children and families will be worse off. These proposals will deepen income inequality, make it harder for people to access benefits they contribute to, and reward wealthy Americans and corporations at a time when everyday Americans are struggling.