Policy Brief: CFED: Earned Income Tax Credit

Today, CFED is releasing a new policy brief on the Earned Income Tax Credit: Enhancing and Expanding the EITC for Low-Wage Workers. Depending who you talk to in Washington, tax reform is either charging full steam ahead or it’s completely dead. Either way, if Congress and the Trump Administration want to make the tax code work for working people – and not just for corporations and the wealthy – they will focus on turning our upside-down tax code right-side up. 
 
You already know that the Earned Income Tax Credit is a right-side up feature of the tax code that is also the most effective anti-poverty tool we have. It has a proven track record, the positive effects of which for children of recipients last well into adulthood, including improved test scores, boosted college enrollment, increased earnings as adults and higher Social Security benefits in retirement. Recently, it was also linked to improved health outcomes.
 
Congress should build on the success of this critical tool for supporting the opportunity economy. Our brief highlights the opportunities policymakers have to expand the credit: increasing benefits for workers not raising children and creating a Rainy Day EITC program to empower workers to save. It also underscores the EITC is not the main driver of the tax gap, and proposals that make the credit harder to claim or less generous in the name of “fraud reduction” should be rejected. Instead, Congress should simplify the complicated rules to qualify, further study measures to reduce improper payments that are already in place and establish minimum competency standards for paid tax preparers.
 
Please use this brief as a tool for your advocacy as you meet with federal policymakers. It’s difficult to predict when exactly tax reform might come up on Congress’s agenda, and even harder to predict whether EITC will be in the cross-hairs if it does, but this brief serves as a strong defense for preserving and expanding the EITC.
 
If you have any questions, please contact Chad Bolt. Thank you for your work to build an opportunity economy for all.

Sincerely,
CFED