It is perhaps a rare day when Barack Obama, Patty Murray and Paul Ryan all agree on something, but here we are.
The issue? Expanding the Earned Income Tax Credit (EITC), the $57 billion a year program for individuals making less than $14,340.
The Ryan document proposes that “If families received the credit with their paychecks, the link between work and the EITC would be that much clearer.” Is that so?
Well, according to the IRS, only “four out of five workers claim the EITC they earned.” So, with 27 million people currently receiving the tax credit per the agency’s estimate, the IRS is missing approximately 6.75 million who could be.
Ryan’s solution? If the tax credit were to be given via paychecks, then the EITC would be distributed automatically. At $2,335 average per recipient according to the agency, there’s another $15.8 billion added to the budget.
Next, he wants to expand the maximum income to qualify for so-called “childless workers” from $14,790 to $18,070 (he also raises the phase out by about $3,280), and drop the eligibility age to 21, who could get up to a maximum $1,005 credit. According to a White House fact sheet, that would help an estimated 3.3 million. There’s another $3 billion.
The Ryan plan cites lower labor force participation among young people as justification for this part of his proposal. And references John Karl Scholz’s contention that increasing the EITC for childless workers could lower unemployment rates.
That is, that the traditional incentive to work — pay — is not enough of an enticement. That, the reason labor participation is down is not because of the financial crisis and the ensuing recession and the fact the Obama economy is not producing enough jobs to be sought after, but because people are lazy and lack incentives to find work.
Yet, labor participation did not precipitously drop until 2009, after the recession began, falling from 66 percent to its current level of 62.8 percent. People didn’t stop looking for work because of a shortage of tax credits, but because there was no new work to be found. So, tell us another one.
In any event, taken in total, Ryan is proposal an $18.8 billion expansion of the EITC alone by making tax credit payments automatic, expanding the maximum income threshold and the eligibility to supposedly impoverished “childless workers” aged 21-24.
And the justification for doing it is almost enough to make your head spin.
Just think about it. Under workfare requirements, you have to be looking for a job whilst receiving government assistance, and then, the government says, to incentivize you to actually accept a job and work, they’re saying you need yet more government assistance.
This is welfare reform? The way out of poverty? Have Paul Ryan and House Republicans given up on creating jobs? Do they accept the new normal of slow growth and therefore the necessity of an ever-expanding welfare state?
How does qualifying another 10 million people for government assistance lead us on a path to prosperity? What a disappointment.
Robert Romano is the senior editor of Americans for Limited Government.
