The Earned Income Tax Credit (EITC) is one of our most effective poverty-fighting tools. According to the Census’s new Supplemental Poverty Measure, the EITC lifted 6.5 million Americans, half of them children, out of poverty in 2012. Unfortunately, policymakers have unnecessarily constrained the value of the EITC for childless adults. The maximum benefit (less than $500, as opposed to nearly $6,000 for married households with three children) and eligibility requirements for these individuals are much less generous, to the point where they are nearly excluded from the program. As the Center on Budget and Policy Priotities underscores, low-income, childless workers are the only group that the federal government taxes into, and in some cases deeper into, poverty.
Raising the maximum benefit for single adults and noncustodial parents and extending eligibility to younger and older adults would help millions of Americans to realize the same benefits the EITC has achieved for low-income workers with children: reduced poverty, increased earnings and labor force participation, improved health outcomes, and more.
Fortunately, lawmakers on both side of the aisle have recognize this fact and made calls recently to reform the program. The President called for this expansion in his State of the Union address, crediting Florida Senator Marco Rubio for promoting the idea. The administration detailed its plan for the expansion in both its proposed FY2015 budget and a separate report released yesterday. The administration proposed to double the maximum allowable credit to $1000 and raise the income eligibility limit from $15,000to $18,000. Lastly, eligibility for the EITC would be expanded to workers as young as 21 and as old as 67. These reforms could increase the credit for childless workers working at the minimum wage by several hundred dollars a year, as the chart from the CBPP below makes clear.
According to the administration, 7.7 million workers would be eligible for a larger EITC, while 5.8 million workers would be newly eligible for the credit. This increase would directly lift 500,000 workers out of poverty and reduce hardship for 10 million more.
Unlike other policy proposals aimed at addressing families’ financial challenges, this one may actually have some political potential. As mentioned, Sen. Rubio endorsed a similar reform last year. In a report issued yesterday, Rep. Paul Ryan contended the EITC is one of our only effective federal anti-poverty programs. Right-leaning critics of the minimum wage have suggested that increasing the EITC is a more targeted and effective way of improving families’ incomes than raising the minimum wage – despite ample evidence demonstrating these policies work together as compliments, not substitutes.
Given its promised benefits and supposedly bipartisan support, whether Congress gives this proposed expansion of the EITC due attention, let alone a yes vote, should be a good test of federal lawmakers’ actual commitment to addressing families’ economic insecurity.