Philadelphia Inquirer, June 7, 2008: Editorial: Earned Income Tax Credit
What has been the most successful federal antipoverty program of the past 30 years?
> Many would say the Earned Income Tax Credit, which puts extra cash into the pocketbooks of the working poor – emphasis on working. That this is no handout program has gained the EITC a stamp of approval from both liberals and conservatives.
> More than 22 million lower-
> income families claimed $43 billion in these tax credits in 2006. That money reduced their tax payments or provided a cash return if they owed no tax.
> Were it not for the EITC, many more U.S. households would fall into the poverty category. It’s the difference in many families’ ability to improve their quality of life.
> The program is so successful that 24 states have enacted their own versions, including New Jersey, and Gov. Rendell has said Pennsylvania needs an EITC.
> About the only criticism of the federal EITC you ever hear is that not enough people know about it. About a quarter of eligible Americans aren’t participating.
> The IRS has been trying to do better spreading the word, but there are other ways that the program can be improved, as well.
> In a new report released this week, the Brookings Institution makes three recommendations that Congress should strongly consider:
> Increase the benefit for childless workers.
Currently they can receive only a tenth (a maximum of $438) of what families with children receive. Tripling the EITC to $1,313 for singles would be an added incentive for less-educated young men to find employment. It would also reduce the tax burden for single workers being paid at the poverty line (about $11,000).
> Get rid of EITC’s
> marriage penalty.
> Under current rules, a married couple with two children who earn $30,000 a year and file their taxes jointly qualify for an EITC of $2,453. Were the couple to file their taxes as single individuals who earned $15,000 each, the one who claimed the two children would get an EITC of $4,824. That result hardly promotes marriage, yet having married parents has proven beneficial to children.
> Increase benefits for families with three or more children.
The Brookings study says working families with three or more children are twice as likely to have low incomes as those with fewer children. Larger families certainly spend more on housing, food, fuel, you name it. It makes sense to give them more aid.
> About 14.5 million families would receive an additional $6.4 billion in benefits were these targeted changes made, according to the Brookings’ study, part of its Metropolitan Policy Program’s “Blueprint for American Prosperity” initiative. In the Philadelphia metro area, which includes Camden and Wilmington, 220,318 tax filers would receive $167 million more in EITC benefits.
> Where would that money come from? Make the move part of a broader tax reform effort that rolls back the Bush tax cuts that were enacted in 2001. The rich got the biggest tax cuts, yet the economy is in a nosedive toward recession. It thirsts for the increased consumer spending that bigger EITC checks can help to produce.