Expand the EITC
As the Presidential campaign season heats up it’s worth considering not only who to vote for, but what the goals of our nation should be. Here’s one goal that both parties should pursue: making the American dream more real for working poor people. Recent economic data shows many Americans are working full time but living below or barely above the poverty line. That’s unacceptable, particularly because there’s an effective, bi-partisan tax policy that can help make sure work in America pays.
According to the Census, more than 36 million Americans are poor. That includes nearly 8 million American families who lived in poverty last year. Even with an increase in the minimum wage to a future rate above $7, many working parents with children will still be living below the official poverty line. The official poverty line for a family of four is about $20,000 — a full-time worker needs to make about $10 an hour to earn $20,000.
It shouldn’t be a political statement to say that every American who works full-time should live above the poverty line. We have a powerful tool to help make this economic imperative a reality - the Earned Income Tax Credit, or EITC. This program is designed to reward individuals who are working to support their families. Only those with children are eligible, and there are defined income caps to the program.
The EITC may be among the biggest bipartisan success stories in this nation’s history. The EITC was enacted by President Ford in 1975. Over the next twenty years, expanding the EITC was seen by members of both parties as a powerful way to encourage people to leave the welfare rolls while still honoring our commitment to help families in poverty. President Reagan championed it during his term in office, and President Clinton made the EITC a cornerstone of his pledge to “make work pay.” The expansion of the EITC under President Clinton not only reduced poverty, it led to five consecutive years of real wage growth, a reduction in unemployment from 7.5 percent in 1992 to 4.3 percent in 2000 and between 1993 and 2000 the number of people on welfare fell 60 percent - from 14.1 million to 5.6 million.
Driving bipartisan support for the EITC is its incredible effectiveness in raising working families out of poverty. Extensive research has been conducted on the program over the years and the positive effects are a testament to the power of thoughtful public policy. According to the Brookings Institution, the EITC lifted nearly four and a half million low-income people out of poverty, including more than 2 million children. The number of single women with children participating in the workforce has increased dramatically since 1980 because of the EITC. It has also encouraged asset building among low-income families, so that that they can reduce their dependence on government benefits, go to college, move to better neighborhoods, and put money into savings.
Despite the successes of the EITC, there is still a need to help those who are working but unable to make ends meet in this country. We can start to fix this problem by filling some of the gaps in the EITC. For instance, the EITC does not help families meet the costs of raising more than two children. It also does not cover childless workers, or those younger than 25. There’s more. At a minimum, we should double the tax credit for childless workers to the same level as families with one child. Adding $3 billion to pay for the expansion of the most effective anti-poverty program in America is one of the best investments taxpayers could make.
The recent, and long overdue, minimum wage increase was a sometimes harsh partisan fight. However many economists from both sides of the political spectrum feel that the minimum wage and the EITC work in synergy. Where the minimum wage is weakest, such as targeting those who need it most like those with families, the EITC is strong. We have taken the first step to rebuilding our end of the bargain with low-income working families by increasing the minimum wage. That was the hard step politically. If we want to truly ensure that work pays in America, enhancing the EITC should offer a less rancorous policy discussion that will have enormously positive impact. Despite our many political differences, we should all be able to agree to make our nation stronger with a program that honors work, rewards ambition, and empowers families to succeed.
The purpose of politics is not to win or accumulate power for one party or the other. The purpose of politics is to help Americans do better and help us achieve our national goals. One of those should be rewarding hard work. This election season would be a good time for candidates to help make that goal a reality and support a sensible Expansion of the Earned Income Tax Credit.
October 15th, 2007 at 3:58 pm
Harold Ford’s idea to expand the Earned Income Tax Credit (EITC)is misplaced.
First, this program is badly misnamed. It Should be called the Unearned Income Tax Credit-(UITC). Not one penny has ever been earned under this program.
The collective amount that has been paid out is in the hundreds of billions-closing in on a trillion.
As with all other welfare, it is a means tested program.
To qualify the first thing required is a job, then you must be in a certain category of income.
The workforce consists of 153 million workers, who also have jobs but are not part of this special interest voting block.
This program now pays out $41 billion a year and goes up every year.
A 1999 congressional study showed that between 27 and 32% should not have been paid.
Below is a partial statement from that study and the number of the report if you wish to Google it.
Government Accountability Office (GAO) Report.GAO-05-92
���However, the credit has had historical compliance problems. The IRS estimated that between 27 and 32 percent of the $31 billion in EITC claimed on Tax Year 1999 returns should not have been paid…
Most of this was fraud. Little has been done to improve that situation.
Maximum recipients receive a whopping benefit of $4200, and it does not exclude them from any other single welfare payment.
If you don’t believe this read your IRS 1040 booklet.
This benefit wipes out any and all pevious withholding, knocks out all FICA, so that latter when beneficiaries collect social security and use Medicare, some else will have paid for it. Added to this recipients get a $2200 plus cash payment.
This program just keeps stealing more from most of the workforce who plug away with no handouts to give to those who will support more nanny-state advocates such as Harold Ford and practically all Democrats.
Of course, it builds up that loyal voting block.
Whenever you rob Peter to pay Paul, you can always count on the support of Paul.
-George Bernard Shaw
October 15th, 2007 at 11:15 pm
I wonder, of the “36 million Americans [who] are poor”, how many of these are American citizens? How many are classified as poor but also have a color tv, a dvd player, an x-box, 200 dollar sneakers, a computer, internet access, one or more cell phones or any of the other modern conveniences which did not even exist only 20 years ago? Poor you say? bunk I say.
I firmly believe that if an adult can not afford a child because it would put the resulting family “below the poverty line”, then it is the height of irresponsibility to have that child. The government should not encourage such reckless behavior and then confiscate my income to pay them to reproduce all in the name of some do-gooders idea of “fairness.”
Rep. Ford knows its easy to raise anybody out of poverty simply by giving them enough money which they didn’t earn and ultimately don’t deserve.
But before we ponder that truism too much, answer the following question. Just what is so noble about the poor? What do they contribute to this country? Its clearly not taxes (that is why they are called poor). Its not their culture (even multiculturalists don’t acknowledge them). Its not their rich history either. Maybe its their aroma.
In conclusion as I’ve mentioned on dozens of other blogs, Leftists find it soooooo easy to be generous with other people’s money but never their own.
October 16th, 2007 at 12:25 am
The EITC makes the less fortunate insensitive to tax increases. It has become a tool that allows the have nots (or their representatives) to raid the bank accounts of the haves with the threat of prison. Our already highly-progressive tax system will only get more so with expansions of the EITC. Here’s a suggestion for you - why don’t we leave more capital in the marketplace to create more jobs for the have nots so they can make their own money? Your proposal uses the government to further enslave earners of high income.
October 17th, 2007 at 3:54 pm
Although I do not believe in blogging, I do feel the need to leave a comment regarding this post.
The issue today with government is that there are no reasonable solutions being offered to control the poverty situation. It is not the government’s job or responsibility to “take care” of people. The Government is allowing themselves to become a crutch for people who don’t want to do the basic things needed for survival, like get a job or the training for a better one. There is a severe sense of entitlement from those who are in poverty. I get frustrated and tired of hearing the same excuse everyday from people who are just too lazy or lack the discipline to make a better life for themselves. This is because the government has allowed them to become co-dependent on programs that was designed by Roosevelt to be an insurance, or a “when it is needed” temporary relief program.
I come from an upper-middle class upbringing, and to God be the glory, my mother and father instilled in me the importance of getting an education and provided me the support and resources needed to assist me down that path, as well as values needed to become the woman that I am today. I know that in order for me to continue to live the lifestyle that I am accustomed to, and to be successful, I have to work and make sacrifices. The new generation lacks morality, discipline, respect for themselves and society, so in turn they won’t feel the need to be repsonsible.
I am a Self-Sufficency Coach with Jobs & Family Services in the state I live in, and I have to say that the government policies in place now are cripling us from promoting and instilling self-sufficiency within the family. The first and important duty is to educate and to assist in relieving people of their current situation. If they keep performing redundant behaviors that keep them in bondage the solution should not and cannot continue to be for government and hard-working taxpayers to pay for their mistakes. It is not fair that while the cost of living continues to increase, tution for my graduate program increases every year, that I have to pay for someone else to live, who does not even want to take the responsibility for their own well-being. Even utilities are increasing because we have to pay for those who don’t even attempt to pay their own utility bills and in turn can get them “forgiven.” I am really tired of seeing my money being wasted.
I was once a hardcore Democrat, was very active and affiliated with my state and county committees, but over the past few years, I have become more and more displeased with the direction we are going in and our way of thinking. I am moving more and more from the left to the right, and agree heavily with the Republicans that Government is too large and needs to be smaller. Creating more job and training programs and better opportunites for those who really want to do better is one of the viable ways to jump-start the economy. I apologize for sounding bitter or insensitve, but we need to focus on helping those who are truly in need, like the elderly, disabled, and those who got into an unforseen situation, not for those who continues to be careless and negligent with their lives.
October 27th, 2007 at 3:03 am
In my opinion, it is the height of irony that Republican types use welfare queen terminology when discussing EITC recipients–”handouts,” “personal responsibility,” and “self help.” And of course, we find an updated version of the welfare Cadillac saw, in this case the EITC X-box and sneakers. Our illustrious Governor Romney was probably thinking along these lines when he said that poor people could pay for mandatory health insurance. After all, they owned cellphones and bought lottery tickets.
The EITC is not a handout, it is a credit for taxes witheld from very meager paychecks. The costs for housing, food, utilities and transportation have gone up dramatically in the past few years, and I do not believe that poor people who can barely survive should be required to pay taxes.
These people are working. They are helping themselves, they are showing personal responsibility. It is not their fault if wages have stagnated. In addition, the plan to expand the tax credit to childless adults should be right up the Republican alley, considering all their complaints about welfare moms who pump out children they can’t afford.
As for what the poor contribute to this country, they do all the nasty jobs essential to our economy. I would guess that this country could do very well without Bush and Cheney, whereas we continue to need our cooks and floor washers. If the EITC recipient stinks, it is from honest toil. Bush and Cheney, however, stink of greed and corruption. Some of these posts I have read also have an aroma of self-righteousness.
Who knows, with all the jobs going overseas, maybe you too will be cleaning toilets and flipping burgers.