Imagine a government-funded anti-poverty tool that encouraged people to work. Now imagine that it’s popular with both Democrats and Republicans, in red states and blue.
Turns out we’ve had just such a tool since 1975: the Earned Income Tax Credit, or EITC.
The EITC is of the most popular and effective anti-poverty tools. It’s a refundable tax credit for workers in eligible low-income families, especially those with children.
The credit works on a phase in, phase-out system. Qualifying families receive more tax credits as income increases up to a certain threshold, and then slowly phases out as income increases past that point. That makes it less likely that workers will turn away jobs or raises for fear of losing benefits.
The federal EITC helped 6.5 million low-income families in 2015, including 3.3 million children. However, the current EITC — which tops out at around $5,500 for families with two kids — isn’t enough to help the millions of families struggling financially. Childless workers get almost no benefit at all, and millions of single parents still struggle.
Proposals to expand the credit are popular among politicians of both parties, including Republicans Paul Ryan and Marco Rubio, Democratic Senator Sherrod Brown, and former President Obama. Their ideas include expanding the credit for childless workers and increasing the credits given to low-income families.
However, the federal government has been dragging its heels, leaving it to states to try to fill the gap. Hawaii recently adopted a state-level EITC, bringing the total to 29 (plus the District of Columbia). Others include Republican-led states like Oklahoma, Louisiana, Iowa and Kansas.
But the feds just can’t agree on how to fund it.
At a time of extreme inequality, the best option would be to raise the …read more