WASHINGTON — As income tax-filing season hits full stride, millions of taxpayers are counting on an obscure government program to help pull their families out of poverty.
Under the Earned Income Tax Credit, the nation's largest cash-assistance program for the working poor, some low-wage workers who file tax returns will pocket up to $4,716 apiece this year.
Most of the nearly $44 billion in total payments for 2006 went to struggling families with children. But nearly 1 in 5 people who get the credit have no qualifying children, and there's growing concern that these taxpayers aren't getting their fair share.
Childless workers — both single and married — received just more than $1 billion for 2006, or only 2.4 percent of program spending, according to the Center on Budget and Policy Priorities, a research center for social-welfare issues.
This year, single and married workers with no qualifying children can get maximum credits of only $427. Those with one child can receive up to $2,853 and workers two or more children can get up to $4,716.
These payment disparities make it harder for the tax credit to lift workers without children out of poverty, and provide little incentive for them to find jobs, both of which are primary goals of the program.
Many researchers, labor economists and Democratic lawmakers say it's time at least to double the maximum tax credit for childless workers, most of whom are poor, single men. Coupled with recent and future minimum-wage increases, that could go a long way toward easing poverty and decades of stagnating wages for low-skilled workers, they say.
House Ways and Means Committee Chairman Charles Rangel, D-N.Y., has introduced a broad tax-restructuring bill, HR 3970, that would double the maximum earned credit for childless workers next year and increase the income level at which the credit begins to phase out.
Rangel said the current $427 maximum was unfair, considering that childless workers were the only taxpayers who must pay federal income taxes even when their incomes fell below the federal poverty line.
"We should have a tax code that rewards hard work and helps individuals and families build a better future," he said.
The push for change is long overdue, many experts said, because work-force participation rates for less-educated men have been falling for decades, while rates for similarly educated women have increased. A more robust tax credit might help reverse that trend for men.
"It's certainly time to re-examine the Earned Income Tax Credit," said Michael Graetz, a Yale University law professor and tax-policy expert. "I think you can fairly ask the question whether or not it's not outdated in terms of being so small for people without children."
That sentiment, however, is hardly unanimous.
Between the earned income credit and the child tax credit, the government pays about $50 billion in tax credits to people with little or no income-tax liability, said Steven Hodge, the president of The Tax Foundation, a conservative anti-tax group. He said increasing those payouts would be a mistake.
"Why should we give an (enhanced) income supplement to a strapping 24-year-old male working at a construction site as a helper? It seems to me to be going beyond the intention" of the tax credit, Hodge said. " . . . We have to be extremely careful about getting to a point where too many Americans are divorced from taxation and are net consumers of government."
Rangel said that people of all income levels got federal tax incentives to encourage all sorts of beneficial activity, including work, homeownership and provision of health insurance. Enhancing wage supplements for low-wage workers is no different, he said.
"For these men at the bottom of the income spectrum, we have focused largely on punitive measures rather than removing barriers to employment and incentivizing increased employment. We need to boost earnings for these workers to attack the poverty and economic insecurity that confronts them," Rangel said.
Of all childless workers eligible for the earned income credit in 2005, about half worked in service industries and only 21 percent worked full time, the Center on Budget and Policy Priorities found. They had an average annual income of $6,050.
Sixty percent were non-Hispanic whites, 17 percent were black and about 15 percent were Hispanic.
Childless adults always have been treated differently under government assistance programs for the poor. Temporary Assistance for Needy Families, food stamps, Medicaid and other program benefits disproportionately favor families with children.
The practice reflects the fact that poverty affects children more dramatically than it does adults, as well as a core belief that able-bodied adults who can work should do so. But the problem for these workers isn't just finding jobs; it's finding jobs that will pay enough.
Wages for low-skilled labor have stagnated and fallen over several decades when adjusted for inflation. And job prospects for low-wage workers have suffered because of cuts in the manufacturing sector and more positions that require special training and education.
Even though some 22 states and the District of Columbia provide their own earned income credits as a portion of the federal tax credit, the wage supplements have done little to help workers.
Karl Scholz, an economics professor at the University of Wisconsin and a visiting scholar at the Brookings Institution, a public-policy research center, supports doubling the maximum tax credit for childless workers. In a recent report from Brookings, Scholz also calls for lifting the tax credit's age restriction, which bars 18- to 24-year-olds from receiving it. In addition, Scholz favors increasing the tax credit to a maximum of $1,413 for workers younger than 30 to encourage early career development.
All these changes, he estimates, would bring another 500,000 people out of poverty and entice 708,000 more workers into the labor market, 40 percent of whom would be single males.
His proposals would cost about $7.3 billion if all eligible workers participated.
ABOUT THE EARNED INCOME TAX CREDIT
Enacted in 1975, it's the nation's largest anti-poverty program and helps raise the incomes of some 5 million families a year over the federal poverty line. Eligible low- and moderate-income taxpayers who qualify for the credit could end up paying less in federal taxes or get refunds. The maximum amount of the credit for tax year 2007 is $4,716. The credit is refundable, meaning it's provided even if the eligible taxpayer owes no federal income taxes.
More than 22 million taxpayers, mostly families with children, received nearly $44 billion in refunds from the program in 2006. About 20 to 25 percent of eligible taxpayers don't claim the credit, however, mainly because they don't know about it.
ON THE WEB
More information about the Earned Income Tax Credit.
Find out if you qualify.