Expanding Earned Income Tax Credit to Childless Workers

By: Danny Schneider

Perhaps Ayn Rand would roll over in her grave if she heard Congressman Paul Ryan (Rep.-Wis.) express his support for the Earned Income Tax Credit (EITC) as a means of lifting poor Americans out of poverty. This is the same Paul Ryan who stated that the reason he “got involved in public service” was Ayn Rand; a philosophical thinker popular with conservatives for her works of literature touting the philosophy of objectivism and opposition to big government, handouts, and compassion for the poor.

Paul Ryan’s embrace of EITC comes after recent attempts by the Obama administration to get Congressional support increase the minimum wage; most recently in the 2014 State of the Union address. The president’s suggestion was met with much criticism from conservatives who consider an increase in the minimum wage to be a burden on businesses that will result in reduced hiring. Many, like Paul Ryan, have suggested that instead of an increase to the minimum wage, an extension of EITC would be more effective and would incentivize work.

Many conservative think tanks, such as the American Action Forum, Heritage Foundation, and the American Enterprise Institute, are also on board with extending the EITC as an alternative to raising the minimum wage.

The EITC is considered to be one of the most successful means of alleviating poverty. It has broad support not only for its effectiveness in lifting people out of poverty, but also for encouraging and rewarding work. EITC is credited with bringing as many as 6.5 million people out of poverty in 2012, as well as reducing the number of children in poverty by25%.

The EITC is a federal tax credit for low income Americans, which is particularly beneficial to workers with children. Workers who make less than $51,600 and have at least one child qualify for the credit. The credit is refundable, which means that the IRS refunds the balance if the credit exceeds the worker’s tax liability. This results in an increase in wages for low-wage workers with children. In 2011 the average family with children received an EITC worth $2,905.

The EITC was created in 1975 under President Ford and then later expanded under President Reagan. Like many conservatives, Ronald Reagan strongly supported the EITC because it encouraged and rewarded working. Reagan said the EITC was “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress”.

In his 2014 State of the Union address President Obama sought to draw the nation’s and Congress’ attention back to the growing inequality in this nation by raising the minimum wage to $10.10 along with expanding the EITC and extending it to childless workers. President Obama stated that “few [policies] are more effective at reducing inequality and helping families pull themselves up through hard work than the Earned Income Tax Credit” and that he “agree[s] with Republicans like Senator Rubio that it doesn’t do enough for single workers who don’t have kids”.

While President Obama has received a cool reception for his proposal to increase the minimum wage, especially amid news from the Congressional Budget Office (CBO) that an increase in minimum wage would reduce employment by 500,000 jobs, there has been some bi-partisan support for expanding the EITC and extending it to childless workers.

As part of its budget proposal, the Obama administration proposed expanding the EITC for childless workers. The Obama administration claims that an increase in EITC benefits for childless workers would not only alleviate poverty but would also have a number of societal benefits, such as benefiting minority men and women working at lower wage jobs, helping young adults, and lowering incarceration rates.

A number of think tanks also support an expansion of the EITC. For example, the Center on Budget and Policy Priorities supports the Obama administration’s claims that extending EITC to childless workers would have a number of beneficial social impacts such as addressing “some of the challenges that less-educated young people (particularly young African American men) face, including low and falling labor-force participation rates, low marriage rates, and high incarceration rates.” The Brookings Institution claims that extending the EITC to childless workers would “eliminate severe housing costs for…153,000 families.”

There is broad bi-partisan support for the EITC as it is one of the most successful federal anti-poverty policies.  It is credited with reducing poverty, encouraging and rewarding work, and supporting American workers with families.  An expansion of the EITC to childless workers is just the sort of compromise this nation needs to bridge the gap between the haves and the have-nots, while also benefiting society through increased employment for minorities and women, higher marriage rates, and lower incarceration rates.