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.[1] 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.[2] 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.)
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