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POLICY INSIGHT
BEYOND THE NUMBERS

President-Elect’s Plan Includes Vital EITC Increase for Adults Not Raising Children

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Senior Director of Federal Tax Policy

The emergency relief plan that President-elect Biden announced yesterday would expand the Earned Income Tax Credit (EITC) for over 17 million adults not raising children at home who work hard at important, but low-paid, jobs. The EITC is a highly successful wage subsidy that’s earned bipartisan support over the years, but the current credit largely excludes adults who aren’t raising children in their homes, and it completely excludes young childless adults trying to gain a toehold in the labor market. The President-elect’s plan recognizes that now’s the time to fix this glaring flaw.

The COVID-19 pandemic and its economic fallout have shined a light on — and widened — our nation’s fault lines over income, race, education, and occupation. People who have lower incomes, are Black or Latino, have less than a college education, or work in face-to-face service jobs faced barriers to employment and opportunity before the crisis began. The health and economic crises also hit them harder, and they will need more time to rebuild their lives. Many in “essential” jobs have faced a higher risk of disease and death, while many others, such as dishwashers in restaurants, have lost their jobs and suffered the cascading effects on hunger, eviction risk, and general well-being.

The President-elect’s EITC expansion, similar to a provision of last year’s House-passed Heroes Act, would help many of these people and millions of others by addressing the EITC’s blind spot toward an often-neglected group. Adults not raising children are the lone group that the federal tax code actually taxes into, or deeper into, poverty, partly because their EITC is so meager. Some 5.8 childless adults aged 19-65 — including 1.5 million Latino and over 1 million Black childless adults — are taxed into or deeper into poverty.

To see how, consider a 25-year-old single woman who works roughly 30 hours a week throughout the year as a cashier at a convenience store and earns about $9 an hour. Her annual earnings of $13,700 are just above the poverty line of $13,621 for a single individual. But federal taxes push her into poverty:

  • Some $1,048 — 7.65 percent of her earnings — is withheld from her paychecks for Social Security and Medicare payroll taxes.
  • When filing income taxes, she can claim the $12,400 standard deduction, which leaves her with $1,300 in taxable income. Since she is in the 10 percent tax bracket, she owes $130 in federal income tax.
  • Thus, her combined federal income and payroll tax liability, not counting the EITC, is $1,178. (This counts the employee but not the employer share of her payroll taxes.) She gets a small EITC of $160, so her net federal income and payroll tax liability is $1,018.
  • In other words, her earnings were just above the poverty line, but federal taxes push her income about $940 below the poverty line.
  • Under the President-elect’s plan, her EITC would grow to $1,145, raising her income after federal income and payroll taxes to $46 above the poverty line.

The President-elect’s plan would raise the maximum EITC for childless adults from roughly $530 to roughly $1,500 and raise the income limit to qualify for the childless workers’ EITC from about $16,000 to at least $21,000. It also would expand the age range of childless workers eligible for the tax credit to include younger adults aged 19-24 who aren’t full-time students, as well as people 65 and over.

The proposal would benefit 17.4 million working childless adults across the country, including 4.0 million Latino, 3.0 million Black, and 746,000 Asian American childless workers.

The top occupations that would benefit include cashiers, food preparers and servers, and home health aides. (See table.) The pandemic has helped the nation better understand and appreciate the essential role these workers and millions of others who work for low pay — and often lack benefits that many other workers take for granted, such as paid sick days — play in keeping this economy running. They deserve more than the meager EITC in current law, and the President-elect’s proposal would provide concrete, meaningful help.

Childless Workers in Selected Occupations Who Would Benefit From President-Elect’s EITC Expansion
Occupation Number of workers who would gain Workers who would gain as a share of all in occupation
Cashiers 1,016,000 26%
Cooks 615,000 26%
Retail salespersons 600,000 17%
Laborers and hand freight, stock, and material movers 500,000 21%
Janitors and building cleaners 451,000 17%
Personal and home care aides 379,000 24%
Stock clerks and order fillers 354,000 22%
Truck and delivery drivers 347,000 9%
Nursing, psychiatric, and home health aides 341,000 15%
Food preparation workers 303,000 25%
Child care workers 275,000 19%
Hand packers and packagers 175,000 26%
Miscellaneous agricultural workers, including animal breeders 163,000 15%
Dishwashers 102,000 35%
First-line supervisors/managers of food preparation and serving workers 86,000 14%
Cleaners of vehicles and equipment 83,000 24%
Shipping, receiving, and traffic clerks 81,000 13%
Combined food preparation and serving workers, including fast food 77,000 21%
Health diagnosing and treating practitioner support technicians 61,000 9%

Note: Childless workers counted as benefiting from the EITC expansion are those aged 19-65 (excluding full-time students 19-24). Additional childless workers older than age 65 would also benefit from this expansion.

Source: CBPP estimates based on U.S. Census Bureau’s March 2019 Current Population Survey, using 2020 tax parameters and incomes adjusted to 2020 dollars.