The Importance of Extending Pro-work Supports in Key Anti-Poverty Programs

October 9th, 2014 at 12:32 pm

If you will take a brief amble with me through some budget weeds, I assure you it will be in your interest.

Even people who pay some attention to such things don’t know that an important work-support for low-income families is scheduled to expire at the end of 2017. I’m talking about parts of the refundable portions of the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC) that were expanded in recent years. Without Congressional action, these improvements will go up in smoke at the end of 2017.

What would be the extent of the damage? My CBPP colleague, Chye-Ching Huang, just posted this interactive tool–pasted in below–that handily answers that question (CC also discusses the details of the set-to-expire provisions).

The tool shows the amount of the credits that would be lost to working families from both programs. Take a single mom working full-time at the current federal minimum wage of $7.25. Plugging in her annual pay–$15,080 (52 weeks * 40 hours * $7.25)—yields a loss of $1,755, a serious blow to a family that is already tightly squeezed.

Suppose we raise the minimum, as per the D’s proposal on the table, up to $10.10. The mom in question gains almost $6,000 in earnings, but if the expanded credits expire, she’d lose over $1,000.

Both of those losses are due to cutbacks in the CTC. But let’s say our mom gets married to a guy with his own kid. Now they’re vulnerable to the EITC cuts, which restore a marriage penalty and lose the boost for families with more than two kids.

Assuming one parent works full-time and the other half-time, still at the current minimum wage, their loss would be almost $2,500. Under a $10.10 minimum wage, they’d lose about $1,680.

Policy-wise, the thing to keep in mind about these components of the CTC and EITC is that they are pro-work. They reward and incentivize work. That’s not just theory, either. Considerable research has underscored this point.

Moreover, this is direction that poverty policy has gone in the country: our safety net has solidly tilted toward work as a path out of poverty. If you want to get ahead and you’re able-bodied, you’ve got to work. I’ve emphasized that just insisting people work doesn’t create jobs, which links up solidly to our full employment agenda. But I don’t think this tilt toward work is bad policy. In fact, it’s hard to sustain support for programs that support those who could work but don’t.

But the jobs have to be there and they have to pay a living wage. That’s the story behind these added work supports and getting rid of them is wholly inconsistent with work-based poverty reduction. Note that permanent extensions of these CTC and EITC provisions are in both the President’s and the Senate democrats’ budgets. Now we just need the rest of the Congress to come aboard.

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One comment in reply to "The Importance of Extending Pro-work Supports in Key Anti-Poverty Programs"

  1. smith says:

    Explain why a household making the median income (half of all households are making less) would be getting a $1,000 dollar tax break (though only if they have three children, meaning they are already costing the taxpayer plenty from school costs)? The money should be spent on stimulating the economy to create jobs and raise everyone’s wages. Lowering taxes is the Republican’s game. I all for lower taxes and programs for child care, but the game of lower taxes to offset stagnant wages has got to stop. And ETIC is definitely not the way out of poverty since the statistics indicate it’s caused by lack of full time income earners. Look at the mean number of earners: http://en.wikipedia.org/wiki/Household_income_in_the_United_States#Distribution_of_Household_Income This means money should go for child care, laws for flexible work schedules, and jobs to allow part timers to become full time, and temporary to become permanent. ETIC are wage subsidies that let businesses pay substandard wages, which is why it’s favored by Republicans. It doesn’t even begin to address the real problems of poverty which is why the poverty rate has continued to climb because of the recession.