Deputy Director, Federal Tax Policy
We noted yesterday a new report by the Organisation for Economic Co-operation and Development (OECD) describes the Earned Income Tax Credit (EITC) as “effective in fighting poverty and encouraging work” and calls for expanding the EITC and lifting the federal minimum wage. My colleague Jared Bernstein points out today that the International Monetary Fund (IMF) has just made a nearly identical recommendation.
In its latest look at the U.S. economy, the IMF says that strengthening the EITC and the federal minimum wage would aid the recovery and improve the nation’s long-term economic outlook:
An expansion of the Earned Income Tax Credit — to apply to households without children, to older workers, and to low income youth — would be another effective tool to raise living standards for the very poor. Similarly, the government should make permanent the various extensions of the EITC and the improvements in the Child Tax Credit that are due to expire in 2017. Finally, given its current low level (compared both to U.S. history and international standards), the minimum wage should be increased. This would help raise incomes for millions of working poor and would have strong complementarities with the suggested improvements in the EITC, working in tandem to ensure a meaningful increase in after-tax earnings for the nation’s poorest households.