President’s Budget Would Help Make Work Pay for 252,000 Childless Wisconsinites

Wednesday, March 5, 2014 at 6:31 PM by

The FY 2015 budget proposal unveiled by the President this week addresses an issue that many politicians, researchers and commentators across the political spectrum have recently been talking about – providing assistance to low-income working adults who don’t have dependent children.  We were very pleased to see the part of his budget that would help that long-overlooked population by making more “childless” workers eligible for the federal Earned Income Tax Credit (EITC) and increasing the small credit for those who are already eligible.

The EITC encourages and rewards work, offsets federal payroll and income taxes, and boosts living standards. As the Center on Budget and Policy Priorities (CBPP) points out: “Next to Social Security, the EITC combined with the refundable portion of the CTC [child tax credit] constitutes the nation’s most powerful anti-poverty program.”  However, the federal EITC currently provides little or no benefit for adults who don’t have dependent children, and the Wisconsin EITC doesn’t apply to that population.

New CBPP fact sheets provide state-specific data on how the EITC and CTC reduce poverty, who currently benefits, and who would benefit from the proposed expansion of the EITC for childless workers. As the Wisconsin fact sheet indicates, 252,000 childless workers in Wisconsin would either become eligible for an EITC or receive a larger EITC in 2015, under the President’s 2015 budget proposal.

More specifically, the credit for a childless adult with wages at the poverty line would rise to $841 in 2015, compared to from just $171 now. For a childless adult working full time at the minimum wage, the credit would jump from only $22 now to $542 in 2015.

If House Republicans don’t have a knee-jerk reaction against anything and everything the President proposes, this part of his budget plan is an idea that some of them might entertain. Michael Strain, Resident Scholar at the conservative American Enterprise Institute wrote that: “Despite its obvious appeal, the [current] EITC has some shortcomings…. it gives very little help to childless workers.… The Program could be amended easily to offer more support to childless workers.” 

Assuming there is some bipartisan interest in the proposal, the daunting task will be to find common ground on how to pay for it. An offset the President supports is closing the “carried-interest” loophole.   Jared Bernstein’s “On the Economy” blog post yesterday describes that as a loophole “which virtually no one defends—it’s awfully hard to provide a rationale for the favorable tax treatment of the earnings of private equity fund managers—but still remains in place.”  I agree, but the power and influence of the money that loophole generates also makes it an awfully hard one to close. 

Regardless of whether that loophole can be closed to offset the cost, using the EITC to help make work pay for low-income childless adults should be an issue that legislators in both parties can get behind.

Jon Peacock 

Categories: Blog, EITC, FEDERAL BUDGET & TAXES, poverty, refundable tax credits | Comments Off on President’s Budget Would Help Make Work Pay for 252,000 Childless Wisconsinites

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