The original purpose of the Earned Income Tax Credit has long been forgotten. Does it matter?
It’s already been done. Or at least, depending on your point of view. Here’s the scoop: The Earned Income Tax Credit is a federal benefit paid to low-income workers, with benefits varying by family size. Unlike SNAP/food stamps and similar benefits, it is intended as a work incentive by paying benefits only to the working poor, as a percent of income up to a cap. For example, a poor taxpayer/couple with two children receives a credit of 40% of their earnings up to a maximum of $5,980, at which point it gradually phases out until the credit is totally eliminated at an income of $42,000. Benefits are primarily targeted at families with children, but very poor childless taxpayers receive up to $543, or, temporarily due to the American Rescue Plan Act, $1,502. This tax credit is fully refundable, which means that for taxpayers who do not owe any income tax at all, or owe less than the value of the EITC, they are paid out the value of the credit, or what’s left of it. (Some helpful links are at the Tax Policy Center, which includes a nice visual; the National Conference of State Legislatures, which provides information on state versions of the benefit as well; and, of course, the IRS itself.
