Sunday, 5 May 2024

Opinion | The Problem With Using Tax Credits to Fight Poverty

Requiring work in exchange for benefits is an unfair system that doesn’t help the neediest. But that could change.

By Matt Bruenig

Mr. Bruenig is the founder of People’s Policy Project, a small-donor-supported think tank that focuses on research and advocacy for progressive policy ideas.

President Biden and congressional Democrats are pushing forward with a $1.9 trillion Covid relief plan that includes changes to the country’s two largest tax credit programs, the child tax credit and the earned-income tax credit (E.I.T.C.).

These credits are among the most significant programs aiming to alleviate poverty for families in America. But until now, they’ve both been limited to recipients with work income, excluding some of the neediest from aid.

The president’s plan makes a partial break with that history. It proposes increasing the child tax credit benefit to $3,000 per child from $2,000 and takes the positive step of making the full figure available to all low-income families, even those with no earnings.

But in the case of the E.I.T.C., Mr. Biden’s proposal increases the benefit for childless adults to $1,500 from $543, but does not make the full $1,500 available to people with very low or no earnings. Nor would it make existing E.I.T.C. benefits for families with children fully available to those with lower incomes. It’s a classic approach: You must work to receive help.

From the time of its introduction in 1975, the E.I.T.C.’s proponents thought of it as a way to reduce welfare expenditures by tying benefits to work, and pushed its adoption specifically to head off other proposals that would have provided benefits to those with no earnings. This began a trend in both parties that encouraged thinking of aid to the poor in terms of tax credits instead of direct cash aid.

While there is merit to helping people find work, it is morally wrong to do so by tying important social benefits to work when the jobless are among those struggling the most.

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