Only one group of American workers is pushed deeper into poverty by the federal tax code: 7 million childless workers, including noncustodial parents, with low-wage jobs. Fortunately, strengthening an existing policy would improve this situation. The federal Earned Income Tax Credit (EITC) is enormously successful at lifting millions of working families out of poverty, but it doesn’t do much for childless workers. It’s important to note that many of these workers are only “childless” when calculating their EITC. They may be partially responsible for children but can’t consider them dependents for the EITC. It’s time for policymakers to improve the EITC so that they reach these struggling workers.
The EITC for childless workers has three problems. First, workers become ineligible even while still earning very low wages. Second, the size of the credit for childless workers is too small, and not enough to keep these workers above the poverty line. Third, the credit is unavailable to childless workers under age 25.
For example, a personal care assistant working about 30 hours per week at Minnesota’s minimum wage will earn about $14,500, barely above the federal poverty line. They would owe about $1,500 in federal payroll and income taxes, but would only get a $23 tax credit through the EITC. If that worker is under 25, they would get nothing at all.
Both President Barack Obama and Representative Paul Ryan, the Republican Chair of the House Committee on Ways and Means, have proposals to improve the EITC for childless workers. Their plans raise the income at which workers can qualify, increase the credit amount, and lower the age limit to 21. The aforementioned personal care assistant earning $14,500 in 2015 would see their EITC increase from $23 to $544.
Boosting the federal EITC would mean more workers can put food in their fridges and gas in their cars. In Minnesota, a single working-age adult needs to earn $11.71 to meet their basic needs for food, housing, transportation, health care and other necessary expenses. That’s higher than our $9.00 state minimum wage. A stronger EITC could go a long way towards filling the hole between a worker’s low wages and what they need to make ends meet.
American workers living paycheck to paycheck shouldn’t be made worse off by the federal tax code. Improving the EITC would fix this glaring flaw and expand the benefits of a bipartisan, proven solution to some of those who need it the most.