An anti-poverty program that makes it pay to work

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Imagine a government-funded anti-poverty tool that encouraged people to work. Now imagine that it’s popular with both Democrats and Republicans, in red states and blue.

Turns out we’ve had just such a tool since 1975: the Earned Income Tax Credit, or EITC.

The EITC is of the most popular and effective anti-poverty tools. It’s a refundable tax credit for workers in eligible low-income families, especially those with children.

The credit works on a phase in, phase-out system. Qualifying families receive more tax credits as income increases up to a certain threshold, and then slowly phases out as income increases past that point. That makes it less likely that workers will turn away jobs or raises for fear of losing benefits.

The federal EITC helped 6.5 million low-income families in 2015, including 3.3 million children. However, the current EITC — which tops out at around $5,500 for families with two kids — isn’t enough to help the millions of families struggling financially. Childless workers get almost no benefit at all, and millions of single parents still struggle.

Proposals to expand the credit are popular among politicians of both parties, including Republicans Paul Ryan and Marco Rubio, Democratic Senator Sherrod Brown, and former President Obama. Their ideas include expanding the credit for childless workers and increasing the credits given to low-income families.

However, the federal government has been dragging its heels, leaving it to states to try to fill the gap. Hawaii recently adopted a state-level EITC, bringing the total to 29 (plus the District of Columbia). Others include Republican-led states like Oklahoma, Louisiana, Iowa, and Kansas.

But the feds just can’t agree on how to fund it.

At a time of extreme inequality, the best option would be to raise the funds by increasing taxes on the wealthy. In Hawaii, for example, the credit is offset by higher rates for those earning more than $300,000 annually. More than 107,000 low-income Hawaiians are expected to benefit from this legislation.

Yet others favor raising revenue from existing taxes that hit the poorest the hardest, like gas and sales taxes.

However, this seems unfair, since people without jobs have to pay these taxes even though they don’t benefit from the EITC. A better solution would be to reduce these regressive taxes and make sure wealthy individuals and large corporations pay their fair share.

Since taking office, President Trump hasn’t displayed any interest in expanding the EITC.

Instead, he’s sought to make it more difficult for working families to benefit by requiring that recipients provide Social Security numbers when claiming the credit. This would make it harder for immigrant families, both documented and otherwise, to claim the credit even if they qualify for it.

Meanwhile, the president is hitting the road to campaign for tax cuts for the wealthiest. All of his tax proposals to date would significantly cut taxes for the wealthy, giving more and more breaks to corporations and their wealthy CEOS.

There were high hopes that Ivanka Trump might become a champion of such family-friendly policies.

But one of her main contributions to the Trump campaign, an “affordable” childcare policy, would amount to a pitiful $20 in help for families making under $40,000, Bloomberg estimates. And it appears to have been removed from the Trump website.

Rather than fighting to make it more difficult to get the EITC, the Trump administration should work to expand the credit, and actually help make America great for the middle class.

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By Aditi Katti

Aditi Katti is a Next Leader at the Institute for Policy Studies. Distributed by www.OtherWords.org.

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