Senior Director of Federal Tax Policy
Today’s post on our chart book on the pro-work Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) focuses on the most glaring hole in the EITC: it largely excludes childless adults and non-custodial parents. President Obama and House Ways and Means Chairman Paul Ryan (R-WI) have advanced important proposals to address this problem, and, as Chairman Ryan said this week, his proposal “basically mirrors the president’s proposal.” Senators Sherrod Brown (D-OH), Richard Durbin (D-IL), Patty Murray (D-WA), and Jack Reed (D-RI) and Reps. Danny Davis (D-IL), Richard Neal (D-MA), and Charles Rangel (D-NY) also have introduced key proposals.
The EITC misses many low-income childless workers entirely and provides only minimal help to many others. All childless workers under age 25 are ineligible for the credit and the average credit for eligible workers between ages 25 and 64 is only about $270, or less than one-tenth the average $2,900 credit for filers with children. A childless adult working full time at the minimum wage is ineligible.
As a result, childless adults are the only group that the federal tax code taxes into — or deeper into — poverty (see first chart).
Providing a more adequate EITC to low-income childless workers and lowering the eligibility age would raise these workers’ incomes and help offset their federal taxes. Also, some leading experts believe that an expanded credit would begin to address some of the challenges that less-educated young people face, including low and falling labor-force participation rates, low marriage rates, and high incarceration rates.
The Obama and Ryan proposals would lower the age floor from 25 to 21 and expand the EITC for childless workers by doubling its phase-in rate, from 7.65 cents per added dollar of income to 15.3 cents (to fully offset workers’ payroll taxes on this income). And they would raise the income levels at which the credit starts phasing out and phases out completely, as our paper explains. These changes would make a big difference for childless workers (see second graph).