The Earned Income Tax Credit occupies a curious space in Washington’s budget wars: it’s the rare welfare program conservatives can embrace, because it can be presented as a tax rebate, rather than a benefits check. A brainchild of the Nixon administration, the EITC has long been held up as an “incentive to work,” presumably in contrast to public assistance programs that support the unemployed.
And so the EITC, along with the parallel Child Tax Credit (CTC) aimed directly at supporting children within a household, are key pillars of both the White House budget proposal as well as the far-right counter-proposal of Representative Paul Ryan. While he rails against public assistance in general for supposedly destroying a “culture of work,” Ryan has praised the EITC as part of a conservative anti-poverty agenda, in which “federal assistance should not be a way station [but] an onramp—a quick drive back into the hustle and bustle of life.”
However, Ryan’s budget would revamp the EITC in a way that steepens the onramp out of poverty. Back in 2009, Congress expanded the tax break for lower-income families, helping to lift 1.5 million people above the poverty line. But Ryan is proposing to let this measure expire, along with other draconian welfare cuts and, in addition, to make “massive unspecified cuts amounting to hundreds of billions of dollars” from the section of the budget containing the tax credits.
Some conservatives do wish to expand low-income tax credits, but with certain revealing political caveats. For instance, one idea circulating on the right is to boost poor families with children by funding extra tax rebates for them with higher taxes on childless single people. Reihan Salam recently argued in Slate that the government should tax childless households extra in order to provide subsidies directly to parents who are raising the next generation (presumably while their child-free counterparts can live relatively carefree, unencumbered lives).
In reality, poor single, childless adults can hardly be considered freeloaders; and this is in part because the current tax code discriminates against them and favors households with kids. Childless adults under age 25 are automatically disqualified from the EITC. And those who do qualify receive little assistance.
Under the current system, according to the think tank Center on Budget and Policy Priorities, a single adult working full time at a minimum-wage job (about $14,500 per year) “will have a federal income and payroll tax burden of $2,617 in 2015—a large tax burden for someone with income this low—after receiving an EITC of just $22.”
The White House budget would specifically expand the EITC for childless workers, which would, according to CBPP, provide a much-needed boost in income stability and workforce participation among the poorest childless adults.
On the flipside, if you parse that demographic of “childless adults” more closely, you realize who is disproportionately helped by the GOP’s favored income subsidy.
Single working adults with two children who earn less than $43,756 can claim a $5,460 maximum credit in 2014. By contrast, adults without qualifying children can’t receive the credit unless they earn less than $14,590, and the maximum benefit is only $496. (Only custodial parents claim tax credits for a qualifying child, even if the non-custodial parents pay child support).
A 2006 Brookings Institution analysis revealed that that the people who are eligible for the EITC but did not file were more likely to be male, single and childless, or have less education or English speaking ability.
The current EITC system’s skewed distribution of benefits reflects a categorical neglect of single men, non-custodial parents and childless working women, which in turn speaks volumes about the history and politics of welfare in a neoliberal era. Since the advent of the US welfare state, the government has defined the “deserving” and the “undeserving” poor along racial and gender lines.
After all, as Politico explains, the idea was originally championed by Milton Friedman as the right’s answer to the welfare state—a “negative income tax” for working families. Meanwhile, welfare policies since the 1970s have been colored by grossly distorted stereotypes of “welfare dependent” black single mothers, in contrast to the hardworking nuclear families who deserved a tax break.
Over time, the role of the EITC has grown massively, and other forms of public assistance, such as direct cash benefits, Medicaid and food stamps, have withered. The shrinking of welfare has hurt all low-income households, but the pain is compounded for many childless workers who face longstanding restrictions on these critical supports. For example, childless adults facing unemployment are generally eligible for just three months of food stamps every three years or are subject to strict work requirements. Ryan and other conservatives also seek to repeal the Affordable Health Act and to undermine Medicaid, another program that largely leaves out many poor, childless men. (As for promoting a so-called “culture of work,” CBPP points out that a large portion of the tens of millions of people affected by these cuts actually already have jobs; they’d just have a harder time supporting themselves with those wages.) Not exactly an “onramp”—more like a social engineering project draped in a tattered safety net.
Beyond the Tax Credit
Progressive economists say the EITC alone cannot serve as a substitute for the immediate supports for the very poor—such as the long-term unemployed or people who can’t secure steady work over the course of the year. Sharon Parrott, Vice President for Budget Policy and Economic Opportunity with the CBPP, explains that the EITC alone cannot stabilize people struggling with structural hardships:
It is not designed to help people who are out of work or can’t work; it provides assistance in a single lump sum at the end of the year, so it doesn’t provide timely assistance when someone loses a job or gets sick and can’t work; and it isn’t large enough to help with certain kinds of very large expenses, such as Medicaid.
Progressive economists contend that the EITC, while a vital income support, should be coupled with a higher minimum wage, which is a direct income boost that comes not in the form of an occasional credit from Uncle Sam but as the wages that your boss owes you for your labor—in other words, getting them to take responsibility as employers. The EITC would be one essential facet of a comprehensive welfare infrastructure—one that covers the whole spectrum of economic precarity—whether you just lost your job, or just lost your health insurance or lost your house to foreclosure.
Whatever setback they’ve encountered, poor people don’t need more “incentives” to lift themselves out of poverty, they need an opportunity to not be poor. And a boost from Uncle Sam once a year, while certainly welcome, isn’t enough to overcome the institutional social forces that weigh them down year round.