President Obama’s 2015 budget rightly seeks to expand the Earned Income Tax Credit to more workers — particularly childless workers. The current EITC rules are unfair to low-wage workers who aren’t raising children, including noncustodial parents. Those workers receive such a small EITC that they can be literally taxed into poverty, or driven deeper into poverty.
By far, the largest share of the EITC goes to those in poverty who work and have children. The EITC is a refundable credit for low-income working families and has been successful at encouraging certain people to take jobs, particularly single mothers. The EITC promotes work and reduces the need for public assistance.
The EITC expansion seeks to incentivize work for three groups whose participation rate in the labor force has declined steadily over the last decade: minority men without a college education, single women working low-wage jobs, and workers with disabilities.
A Michigan minimum wage childless worker employed full time earns around $15,000. That’s 133% of the federal poverty level and, according to Making Ends Meet in Michigan, $6,500 short of the amount required for a single childless worker to meet their most essential needs like housing and transportation.
Under current EITC rules, this worker would be ineligible for the EITC, because they made too much money. Under the president’s proposal they would qualify for an EITC of $470, serving to offset a low-wage income and help with expenses such as car repairs needed to remain in the work force.
The president’s proposal would double the maximum credit for childless workers to about $1,000, increase the income levels at which the EITC phases out to about $18,070 for single childless workers, and $23,570 for childless married taxpayers filing jointly, and make the credit available to workers beginning at age 21 as opposed to age 25, nearly doubling the total number of childless workers receiving the EITC.
The most common occupations among those who would benefit from the proposed expansion of the EITC are low-wage retail and food service workers, three quarters of whom live in households with incomes below 150% of the poverty line. And 470,000 childless workers in Michigan would benefit directly from President Obama’s planned expansion of the EITC.
– Jason Escareno