Ebook Expanding the EITC for Single Workers and Couples Without Children
The Earned Income Tax Credit (EITC) is a refundable federal income tax credit first enacted with bipartisan political support in 1975. The EITC encourages low-income workers with children to enter and remain in the labor market by supplementing the earnings of those working for low wages, thus “making work pay.”
The EITC’s popularity is based in part on its ability to provide both work incentives and tax relief for low-income workers and their families. Considered the nation’s largest anti-poverty program, in 2004 the EITC reached more than 21 million households and provided benefits of more than $39 billion to low-income workers and their families. Every year, the EITC is credited with lifting more than 4.5 million individuals more than half of them children–above the federal poverty line (Greenstein, 2005b).
Currently, there is only a small EITC for single workers between the ages of 25 and 64 who are not raising children. The EITC for childless workers currently provides a 7.65 percent tax credit on up to $5,380 of earnings, with a maximum benefit of $412.3 Both the Treasury Department and the Office of Management and Budget (OMB) report that the EITC for childless workers has grown very slowly. In 2002, only about 4 percent of the EITC went to childless workers, totaling less than $1 billion.
However, this group of low-income workers already pays a surprisingly high percentage of its earned income in federal taxes. Childless adults pay positive taxes starting with their first dollar of earnings, as the EITC only offsets half of the 15.3 percent of their earnings that are deducted for payroll taxes (based on the assumption confirmed by a Treasury Department analysis that workers ultimately bear both the employer and employee share of payroll taxes in the form of lower wages) Greenstein, 2000; Marguerite Casey Foundation, 2005). Despite the inclusion of childless workers in the EITC, its current structure offers only minimal support for this sub-population and does not fully offset a range of ongoing regressive tax (payroll, sales and excise) burdens.
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