Workers without children – including non-custodial parents (who do not have custody of their children for the purposes of their tax filing) – are the only taxpayers that the federal tax code pushes into or deeper into poverty. Lawmakers in both parties agree the problem needs a fix and even agree on how to do it. Republicans and Democrats have similar proposals to fix the existing gap in the Earned Income Tax Credit (EITC) that hurts childless adults. Rather than wait any longer to address the issue in comprehensive tax reform that always seems likely to happen “next year,” Congress should enact this common sense EITC solution now.
The EITC offsets federal payroll and income taxes for low-income households, increasing after-tax, take-home pay. Research shows that the EITC is an effective tool to incentivize those who are not working to enter the labor force. In 2015, Maine lawmakers recognized these powerful benefits and expanded the state EITC. However, the federal credit is extremely small for workers without children and non-existent for workers under age 25.
For example, 21-year olds making poverty-level wages of $12,500 a year will owe $956 in payroll taxes and $214 in federal income taxes. Since they are too young to be eligible to receive the EITC, they are left $1,170 below the poverty line. Slightly older workers (25 or over) are eligible, but the credit is only $184, still leaving the individual nearly $1,000 under the poverty level.
Lowering the eligibility age and increasing the maximum credit would alleviate the pressure on these workers, who perform the lowest-paid but often more physically taxing jobs in schools, hospitals, nursing homes, home health care, retail stores, and other workplaces in Maine and across the country
President Obama and House Speaker Paul Ryan have both proposed lowering EITC eligibility to 21 and raising the maximum credit to about $1,000. However, their proposals would still tax some workers tax into poverty. To truly fix the gap, lawmakers should adopt bills by Sen. Sherrod Brown and Rep. Richard Neal, designed to ensure that Congress taxes virtually no workers into poverty. Recently released data conclude that the Obama-Ryan proposals would help 62,000 Maine workers; the Brown-Neal proposals (cosponsored by Sen. King and Rep. Pingree) would help 72,000 Maine workers.
Last year, a bipartisan agreement made permanent key improvements to the federal EITC and the child tax credit, ensuring a better life for 64,000 children in 37,000 Maine families. But lawmakers left out an EITC fix for childless adults. We urge federal lawmakers to move forward this year with a solution that will reduce poverty and reward work for tens of thousands of Mainers.
