TPC Updates Analysis of Ted Cruz’s Tax Proposal To Reflect a Change in His EITC Proposal

After the Tax Policy Center published our analysis of Senator Cruz’s tax plan, the campaign told us that they also intend to expand the Earned Income Tax Credit (EITC). This change would modestly increase after-tax incomes of low-income families while increasing the cost of the overall Cruz proposal.

The EITC is a refundable tax credit that subsidizes earnings for low income families. Beginning at the first dollar earned, the credit phases-in as a fixed percentage of earnings until the credit reaches a maximum dollar value. The credit is constant at the maximum value over a range of income that depends on marital status, after which the credit begins to phase-out. The maximum value of the EITC increases with family size (up to three children).

Senator Cruz’s plan would increase all phase-in and phase-out rates of the credit by 20 percent. For example, the credit for a family with two children would be 48 percent rather than the 40 percent rate that applies under current law in the phase-in range, and would phase out at a 25.27 percent rate rather than 21.06 percent.  The maximum credit would also be 20 percent higher than under current law.

The modification raises the total cost of the Cruz plan by nearly $150 billion over the ten year budget window, from $8.6 trillion to $8.75 trillion (before accounting for interest costs or macroeconomic feedback effects).

Compared with the earlier proposal, the modified Cruz plan would increase 2017 after-tax income for the bottom three income quintiles by $116 (0.9 percent), $169 (0.5 percent), and $53 (0.1 percent), respectively. Higher income earners would be largely unaffected by the changes.

The revised distribution table is shown below.  For the full revenue and distributional implications of Senator Cruz’s updated plan, see TPC tables T16-0032 to T16-0036, available here.

Note: This post was updated to correct the sub-head on the distribution table.  It refers to 2017, not 2025.