10 Updates

Questions About Expanding The Childless EITC

Feb 5 2014, 1:53pm CST | by

As the idea of expanding the “childless EITC” gathers steam, it’s time to start thinking about what the next generation of worker credits should look like. Today’s EITC lifts millions of families...

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23 weeks ago

Questions About Expanding The Childless EITC

Feb 5 2014, 1:53pm CST | by

As the idea of expanding the “childless EITC” gathers steam, it’s time to start thinking about what the next generation of worker credits should look like. Today’s EITC lifts millions of families out of poverty each year by providing a wage subsidy that encourages work. But it largely skips over childless adults. Politicians from President Obama to Senator Marco Rubio (R-FL) are looking at ways to include workers without kids in the EITC or an EITC-like program.

Today, the maximum childless EITC benefit is just $496, less than a tenth of the $5,460 available to families with two children. And what’s more, if you don’t have children, you have to be very low-income to qualify for any benefit at all. Families with two children can receive the EITC until their earnings reach $43,756 ($49,186 if married). But families without children get nothing once they earn $14,590 ($20,020 if married).

There’s no doubt that a significant expansion of the childless EITC could reduce poverty and differences in the tax treatment of families with and without children. (And many workers who do not report children on their tax returns actually do have children, though they may not live with them.)

But before legislators double down on the EITC for childless families, they must get a handle on some yet-to-be answered questions.

First, should we retain the current age limits for the childless EITC? Although a parent at any age who lives with their child can receive the EITC if they meet the other eligibility rules, folks without children must be between the ages of 25 and 64. This excludes most students and all seniors.

Under current law, you cannot receive the childless EITC yourself if you qualify someone else for the credit. Full-time students are often qualifying children, while part-time students are not.  Retaining this rule means full-time students cannot get a childless EITC but getting rid of it means we might be subsidizing a lot of students from upper-middle income families.

One solution would be to lower the age limit to 18 (rather than eliminate it entirely) but keep the qualifying child rule. This could provide a subsidy to part-time student workers as well as young, independent workers without also encouraging them to drop out of high school in favor of work.

At the other end of the age spectrum, should low-income elderly workers benefit from the EITC? Older workers with low enough earnings to qualify for the EITC are at great financial risk during retirement.

The EITC is often criticized for its built-in marriage penalty. Imagine a single mom with three kids who earns $17,500. Prior to marriage, she qualifies for the maximum credit of $6,143. But if she marries someone with identical earnings, the additional income will reduce her EITC to just $3,670.

If the childless EITC were expanded and the husband had his own EITC, he would lose all or part of his benefit when the couple married, magnifying the tax increase this couple would face relative to when they were not married. As long as the EITC phases out at higher incomes and is tied to joint income, this will remain an issue.

Steve Holt and I provide a model for reducing marriage penalties by focusing on individual worker earnings, rather than family earnings. This could equalize incentives between primary and secondary earners to work, a move that could help married couples move into the middle class . We propose limiting the worker credits to families with low and moderate joint income, in order to minimize the chances that a low-income worker in a high-income couple would receive the new credit.

Expanding the childless EITC is the right call for policy makers interested in reducing poverty. But policymakers need to answer some tough questions if they are going to get the new policy right.

Source: Forbes Business

 
Update
10

6 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

Cambodia's Famous Battambang Circus
KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewa ...
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6 weeks ago

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KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into ...
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6 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

Federal Aviation Administration Bans All US Flights To Israel
KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Ra ...
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Update
7

6 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

6 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

INDIA-CHINA-DIPLOMACY-TRADE
PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Sel ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

6 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

Government Weekly Cabinet Meeting
KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in compensation ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

6 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Da ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

6 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

Iskandar Johor Open - Previews
JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an al ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

6 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

EurAsia Cup presented by DRB-HICOM - Day One
PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

6 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara Skyway (Kide ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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