Expanding the EITC to Help More Low-Wage Workers

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Abstract

The case for expanding the EITC for workers without qualifying children is compelling, as the current EITC provides little help to this group. We argue that the EITC for these workers should:

• provide these workers with a strong incentive to increase work effort; 
• provide a significant subsidy to low-earning workers working near a full-time work level;
• begin phasing out only after an individual is working at a level at least equivalent to full-time minimum wage work;
• apply to both prime-age and younger workers; and
• be effectively coordinated with the Making Work Pay Credit.

Introduction

In recent years, numerous policy groups, members of Congress, and others have called for expanding the Earned Income Tax Credit for workers without qualifying children, e.g, low-earning single and married workers without children, noncustodial parents, and parents with adult independent children.   The American Clean Energy and Security Act, passed by the House of Representatives on June 26, would (among many other things) expand the EITC for these workers.

The case for expanding the EITC for workers without qualifying children is compelling.  The EITC plays an essential role as both a work incentive and a means of raising the incomes of the lowest-earning workers.  But the current EITC provides little help to some groups that would benefit from increased workforce participation and that are hurt due to low or declining earnings for less-skilled workers. 

The EITC for workers without qualifying children should:

• provide these workers with a strong incentive to enter the labor force and increase hours of work;
• provide a significant wage subsidy to low-earning workers who are working near or at a full-time work level;
• begin phasing out only after an individual is working at a level at least equivalent to full-time minimum wage work;
• apply to both prime-age and younger workers; and
• be effectively coordinated with the Making Work Pay Credit.

The current EITC falls short on all of these goals.  The House bill takes significant steps forward, but can be improved.

This brief explains the importance of expanding the EITC for workers without qualifying children; describes the criteria that should guide such an expansion; describes and commends the House approach; and describes changes that we think would improve it. 

(End of excerpt. The entire brief is available in PDF format.)

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