In the spring semester of my sophomore year, I was a volunteer for the IRS’s Volunteer Income Tax Assistance (VITA) program. VITA is an excellent program that teaches its volunteers a tremendous amount about the federal tax code, especially as it pertains to low-income households. More importantly, it provides tax-filing services to low-income households that might not otherwise be able to file a tax return. Now, as you may have heard, 47 percent of Americans do not pay any federal income tax, so why would these households benefit from utilizing VITA? Why file a federal tax return that states they owe no federal taxes for the previous year?
For low-income households with qualified children, there can be more then $5,000 worth of reasons to file a tax return due to the Earned Income Tax Credit (EITC). The EITC works by supplementing earned income in three stages. In the first stage, the credit is phased in so that for every dollar of qualified earned income, the federal government will give households a certain percentage of that earned dollar as a fully refundable tax credit, up to a maximum credit. Once a household has earned enough income to qualify for the maximum credit, the credit “plateaus;” the household keeps the maximum credit until another income threshold is achieved, at which point the credit is phased out such that there is always a net benefit to earn an additional dollar. In other words, at no point while eligible for the EITC will a person ever be poorer by working for and earning an additional dollar. Unlike programs with arbitrary income eligibility cutoffs like Medicaid or rent control in New York City, there is never an incentive to stay under a certain income with the EITC.
It is a beautifully designed and well targeted tax credit. It accomplishes the progressive goal of lifting families out of poverty through solidly conservative means. Because of the EITC, approximately 5.4 million people were lifted above the poverty line in 2010. What’s more, individuals must earn their tax credit by working an honest days labor. It’s a win-win-win for progressives, conservatives, and, most importantly, for the poor.
It is unsurprising that when it was first implemented in 1975, it enjoyed broad bipartisan support. It continued to have bipartisan support when Republican demi-god Ronald Reagan supported its expansion in 1986. However, by 1986, there was less support from congressional Republicans for anti-poverty programs, even ones like the EITC that were centered on promoting work as a means to escape poverty. Unfortunately, the Gingrich revolution of 1994 eliminated what little support the EITC had from Republicans.
Fast-forward to last week, when there was a video leaked of Romney at a $50,000-a-plate fundraiser dismissing the 47 percent of Americans who don’t pay (federal income) taxes as people whom he doesn’t have to worry about. Romney’s 47 percent remarks are just the latest iteration of a long brewing conservative meme; that a near majority of the country is a bunch of freeloading bums who have been coddled into dependency by a suffocating web of ever expanding government benefits. This 47 percent that is rotting America from the inside includes those that qualify for the EITC: you know, those moochers who work low paying jobs and for the most part hold down those jobs while raising children.
This worldview, the one those folks in that $50,000-a-plate fundraiser seemed to have, is not a new one. There is a very long tradition of the wealthy looking down on the poor, and scolding them for their poverty. During the modern era, Republicans have never believed in hand outs, but they used to believe that there was a time and place to give a hand up to those in need. Now it seems that Republicans can’t even spare a hand to those that are struggling just to keep their head above water. The Republican hand is too busy vacuuming money away from those in need and shoveling money towards those wealthy donors who would reap a preposterous windfall from the Romney tax plan. After all, those $50,000-a-pop fundraisers don’t pay for themselves.