Ways and Means Committee Chairman Charles Rangel's Proposed Expansion of the EITC for Childless Workers
An Important Step to Make Work Pay
October 25, 2007
The Earned Income Tax Credit for workers without children is currently extremely small, too small even to fully offset federal income taxes for workers at the poverty line.
Ways and Means Committee Chairman Charles Rangel’s proposal to increase the EITC for childless workers would:
- Prevent workers whose wages leave them in poverty from owing federal income taxes.
- Improve work incentives for childless adults and, in particular, for less-educated men — a group whose declining employment rates are a major cause for concern.
- Ensure that full-time minimum wage workers will not become ineligible for the EITC when the minimum wage increases to $7.25 an hour in 2009.
- Reduce poverty and hardship among low-wage workers without children, a group with access to almost no other forms of government support.
- Likely have a positive impact on children, because many “childless” workers eligible for the EITC are noncustodial parents.
- Benefit more than 7 million workers nationwide and thousands in each state (see state-by-state estimates in the appendix).
The tax reform plan released today by Ways and Means Committee Chairman Charles Rangel includes a sizable increase in the component of the Earned Income Tax Credit available to low-income working adults who are not raising minor children. Senators Barack Obama, Evan Bayh, and John Kerry and Representatives Bill Pascrell, John Yarmuth, and Keith Ellison also have introduced legislation that would expand the childless workers’ EITC, and New York City Mayor Michael Bloomberg and several Democratic presidential candidates have offered proposals as well. (For a summary of the congressional proposals, see the box on page 7 of the PDF.)
The focus on the EITC for childless workers is overdue. Over the past two decades, policies have been enacted to improve work incentives for low-income working families with children and to help those families make ends meet. Childless adults, however, have been largely left out of these efforts to promote and reward work.
These workers receive very little help from the EITC. The maximum EITC for childless workers, $438 in 2008, is less than one sixth the size of the maximum EITC for a family with one child, and less than one tenth the size of the maximum EITC for families with two or more children. Furthermore, the EITC for childless workers begins to phase out at an income level of only $7,160 in 2008 for single workers, or less than two thirds of the poverty line (see Table 1). And a single childless worker with income exactly at the poverty line is eligible for an EITC of only $142, which is substantially less than the worker owes in federal income and payroll taxes. As a result, such workers are taxed deeper into poverty.
The childless workers’ EITC is so small that it accounted for only about 2 percent of EITC costs in 2006. It is available only to workers between the ages of 25 and 64; young adults under age 25 who work for very low wages cannot qualify for it. (See the box on page 8 of the PDF.)