Is the earned income credit fair? Doesn't it reward taxpayers that only work on a part-time basis?

Question

Is the earned income credit fair? Doesn't it reward taxpayers that only work on a part-time basis? What might be a better solution?

Answer 1

As you imply, there are persons who work only enough to get the maximum EIC. The EIC is a source of a huge amount of tax fraud.

However, for low income families with children the EIC has been a welfare benefit. The tax system is used as an income redistribution system.

Given that there is going to be redistribution of income to those that do not have enough income to live, this is an alternative to people applying for welfare. It is also an incentive for people to earn at least some wages.

An alternative would be to give people SS credits for work up to the EIC upper threshold without paying into the system, rather than paying into the SS system and then getting it refunded if the income is below a certain level.

However a refundable credit for low earning taxpayers with children is better than a welfare system that encourages people to not work at all.

Answer 2

Raising the minimum wage is bogus. If you believe the people who have failed to, or are unable to, develop the skills to get a decent paying job deserve a handout, then fine. Vote for increased welfare but call it what it is. Raising the minimum wage only hurts the business man, the guy who is creating jobs and wealth for the politicians to tax and spend away.

Okay, here’s my idea. Stop paying the EITC in cash. Instead issue a debit card like the states use for food stamps. If they have a “real” refund from withholding they can have that in cash. Merchants can accept it for anything except alcohol, tobacco and wagers such as Keno or Bingo. When I worked for HRB I would see people come in, almost too drunk to stand, get their check and announce they were headed to the Keno parlor. Get the money out of the underground economy. Most people at this level already have demonstrated they can’t handle their money so the state has to put some conditions on them. The EITC, like welfare has created generations within families dependent on handouts.

Then limit the amount or years they can collect this money, just like welfare. They get 3 consecutive years or $10,000 lifetime benefits then that’s it. Perhaps if the EITC was used for tuition they wouldn’t need it so long.

Answer 3

Better paying jobs with benefits. Earned Income credit was designed to provide relief to low wage earners who have children.

Answer 4

Well, some of the recipients may only work part time but consider the plight of a single parent raising 2 kids on $9.00 an hour. I have several friends in exactly that situation. They collect several thousand in EIC, and it makes basic survival possible. And that's in a small mid-western town with a very low cost of living. I can't imagine how someone in that situation could survive in LA, NYC or Boston.

You want a better soluton? Raise the minimum wage to around $12.00 per hour and chuck the EIC. That's where it would be if it had kept up with inflation since 1966. In 1966, the minimum wage was $1.45 per hour and it was possible for a family of 4 to survive on it. Nothing fancy, to be sure, but it was independent survival without any handouts from the government. Sadly we've let the "needs" of big business take over the needs of the citizenry. That's a sad state of affairs, IMHO.

Addendum: If anyone who gave this a thumbs-down has a better idea, please have the guts to post it. Don't just stick a TD here and move on. Show a little backbone and let's hear what you have to say!

Answer 5

No, my husband is a full-time school teacher and we qualify for the EIC. Unfortunately, there are many jobs out there that just don't pay enough even if you do work full-time.

Answer 6

You will get two answers to your question, 1 given by those who get the EIC and 1 by those who do not.

Answer 7

Nobody said the tax code was "fair".

Answer 8

Sure, unless you think people should have to EARN money instead of taking it from others.