The foundation of the federal government’s antipoverty system is the Earned Income Tax Credit, or EITC, which increases the take-home pay of people working in low-wage jobs like waiting tables or cleaning hotel rooms. The program lifted some 6.5 million Americans out of poverty in 2012, including 3.3 million children, according to the Center on Budget and Policy Priorities. But the program has a major hole. Adults who don’t have children get barely any EITC benefits.
Republicans and Democrats have both offered proposals to fix that flaw. But the Republican plans, like the one Senator Marco Rubio introduced a few weeks ago, would close one hole while opening another. Specifically, they would help one group of low-income Americans, but only by hurting another. This week, Democratic Senator Patty Murray introduced an alternative—one that would help more people claim the benefit but without taking money away from people who already get it. And it would do so in a way that’s deficit neutral.
Will the Republicans go for it? That seems unlikely.
Under the current system, childless adults can collect a maximum of $496 a year in EITC benefits. That’s less than 10 percent what a parent with two kids can collect ($5,460). Murray’s plan would expand the credit for childless adults so that they could collect roughly $1,400—still a lot less than what parents could get, but a lot more than they get now. Murray, along with her co-sponsors Senators Jack Reed and Sherrod Brown, would also reduce the so-called “marriage penalty” in the EITC. This penalty occurs when two people filing jointly can collect less in benefits than they would each filing separately. The bill would fix that by allow dual-earning families to deduct 20 percent of one earner’s income, lowering their tax bill. It would also lower the eligibility age for childless adults to 21 from 25.
Rubio’s proposal (which would actually convert the EITC into a slightly different program called a wage subsidy), has some similarities. It, too, would allow childless adults and parents to collect equal amounts in benefits, while also eliminating the marriage penalty. But, in order to keep it deficit neutral, Rubio’s plan would necessitate a significant benefit cut for parents.
Murray’s proposal, on the other hand, offsets the cost ($144.9 billion over 10 years) by closing corporate tax loopholes. Specifically, she would require corporations to pay taxes on profits not derived from legitimate business operations that have been stashed in offshore tax havens. The legislation, called the 21st Century Workers Tax Cut Act, would also close a loophole that companies have used to circumvent the $1 million limit on the deduction for executive compensation.
The common desire to bolster the EITC for people like childless adults might seem like grounds for compromise, particularly since prominent Republicans have traditionally supported the program. But Democrats will not accept reducing the credit for parents and Republicans will not close corporate tax loopholes unless that’s part of a broader, comprehensive tax reform bill. It’s a reminder, once again, of Republican priorities. When they really care about new programs, like the “doc-fix” and rolling back cuts to military pensions, they’ll resort to whatever it takes—even budgetary gimmicks—to pay for them. When it comes to programs like the EITC, the cuts must come from other low-income Americans.