President Trump will seek to tighten restrictions on some tax credits to prevent them from being claimed by illegal immigrants, a measure that the administration says is necessary to respect taxpayers and balance the budget.
Trump's fiscal 2018 budget, set to be released Tuesday, will set higher eligibility standards for the earned income tax credit and the child tax credit, Office of Management and Budget Director Mick Mulvaney said Monday. According to the administration, the measures will save $40 billion over 10 years.
"How do I go to somebody who pays their taxes, and say, ‘Look, I want you to give this earned income tax credit to somebody who's working here illegally'? That's not defensible," Mulvaney told reporters. "And it's a reasonable accommodation to simply ask them for Social Security numbers."
The earned income tax credit is a refundable tax credit, which means that if a recipient has no income tax liability, the government sends the person a check. Part of the child tax credit is also refundable.
Both programs have high improper payment amounts. About a quarter of payments were made improperly in 2016, according to the Treasury inspector general for tax, or about $17 billion for the earned income tax credit and $7 billion for the child tax credit.
Those wrongful payments do not necessarily represent fraud. For the most part, they reflect families getting confused by the eligibility rules.
Under current law, workers must provide a Social Security number to receive the earned income tax credit. To claim the refundable portion of the child tax credit, though, only an individual taxpayer identification number is necessary, which the IRS issues to workers who are not authorized to work but need it for tax purposes.
The administration did not say how eligibility would be tightened other than to state that the benefits would be limited to people who are authorized to work in the country.
Some anti-illegal immigration groups have said that allowing workers to claim credits without providing a Social Security number amounts to paying illegal immigrants to stay in the country. Conservative lawmakers also have favored tightening the restrictions as a matter of fiscal conservatism.
Liberal groups, though, argue that illegal immigrants pay taxes, such as payroll taxes for Social Security, for which they won't get benefits. More generally, the low-income tax credits generally benefit needy families, even if they technically did not qualify for the benefits they received.