More Childless Workers Should Get the Earned Income Credit.
The Earned Income Tax Credit (EITC) is the nation’s largest cash assistance program for low-income workers. In 2007, 24.5 million families received $48.5 billion. But while childless families accounted for nearly a quarter of tax units claiming the credit, they got less than three percent of the tax benefits.
This is bad policy. Many studies have shown that the EITC encourages families with children—particularly single moms—to get jobs. The same might be true for childless men—if the credit provided substantial assistance.
Why the inequity under current law? Two reasons. First, childless workers can’t get a credit larger than $457—less than a tenth of the maximum credit for families with three or more children. Second, the credit for childless families goes only to those with very low incomes. Childless workers who earn more than $13,460 ($18,470 if married) can’t get any EITC. But the credit doesn’t even begin to decline for families with children until their income exceeds $16,450 ($21,460 if married)—and married couples with three or more children continue to get some credit until their income reaches $48,362.
Many plans would provide additional assistance to low-income childless families—Steve Holt and I devised one that would eliminate the current EITC, Child Tax Credit (CTC), and Making Work Pay credit and instead provide a 20 percent credit for individuals until they have earnings equivalent to working year-round, 30 hours a week, at the minimum wage. This would provide a maximum credit of $2,175. Families with children would receive a Child Credit that would fill-in the gap left by eliminating the CTC and provide the residual benefit these families currently receive under the EITC. It’s no wonder that proponents are pushing for change. A recent report by Robert Moffitt and John Karl Scholz attributes the rise in deep poverty in part to increasing numbers of very poor childless individuals. This, coupled with longstanding concerns over the decline in low-skill wages, makes renewed focus on government incentives to increase work important.
On the campaign trail, President Obama proposed three changes to the EITC : a modest increase in the income limit for the childless EITC; a higher credit rate for families with at least 3 children, and a higher threshold above which the credit phases out for married couples. The American Recovery and Reinvestment Act of 2009 accomplished the last two goals but failed to increase the childless EITC. It’s past time for the president to push hard for this expansion—or even something bigger.
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But maybe you could a little more in the way of content so people could connect with it better.
Youve got an awful lot of text for only having 1 or 2 images.
Maybe you could space it out better?
what the heck does having children or childless has to do with taxes?? ridiculous!
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A higher minimum wage would be the preferable vehicle for making sure the working poor can make ends meet – with a backstop of paid training in case the higher wage leads to unemployment (although economic studies have repeatedly shown that, because most low wage workers labor in an environment of monopsony, there has never been a purging of the workforce when the wage goes up).
Such a wage increase could be part of a consolidation of tax benefits for families (and housing) in a larger refundable child tax credit (which would adjust withholding) – which could even be part of a tax simplification that shifts filing responsibilities to the employer for the vast majority of taxpayers. If this occurs, a higher minimum wage is necessary so that workers are paid some base wage in their own right, rather than being paid mostly through the child credit. The base wage would also remain taxable for employers. To illustrate, if a decent child credit existed, say of $500 per month per child, a family with three children would get $1500 in credits. Some employers might be tempted to pay the minimum wage to such families. The current $7.25 minimum wage would mean that the credit would be higher than the $1276 wage payment they receive now. An after tax $10 wage for a full time worker would at least be higher at $1760 a month. A wage of $8.50 after taxes (with a 15% rate on an implied $10 wage payable as a hidden VAT or business income tax) would be almost equal to the credit and provide a family with three kids with almost $3000 with one wage earner. If dependent spouses received the same credit as children, then a family of two kids and one stay at home spouse would also get $3000 per month. That would not be enough to live well in the D.C. area, but in much of the country it is at least survivable. A single person with no kids could also at least afford a room in a group house at that wage. A family with three children and two workers would bring down $4500 minimum per month if the minimum were $8.50 and about $5,000 on $10. With child care subsidies, this might almost be adequate – even for the DC area.