Tax Credits for Working Families

Ideas From The Right: Economist Glenn Hubbard on Reducing Income Inequality through the EITC

September 19th, 2014

This issue is the latest in our commentary series, “Ideas From The Right: Conservative Approaches to Tax Credits for Working Families.” For this interview, we sat down with economist Glenn Hubbard, dean of Columbia Business School and former Chairman of the Council of Economic Advisers under the Bush administration. Mr. Hubbard’s responses have been edited for brevity.

GlennHubbardYou’ve written on several occasions about using tax reform to reduce income inequality. Why do you think the tax code is the best vehicle for this endeavor?

I think the real issue in combating income inequality is to empower people toward work. A lot of people left the labor force as a result of the financial crisis, and monetary policy alone really isn’t going to bring those people back. It’s a structural problem, and we could assist it by providing direct support for work through the tax code.

You propose expanding the Earned Income Tax Credit (EITC) for childless workers as one way to tackle income inequality through the tax code. Why the focus on this credit in particular?

The EITC is already part of the tax code. The EITC started out as a method of providing direct support for work, but it has become more of a family support program. While it definitely makes sense to support families, we need to also strengthen the credit for single workers if we want to do more to encourage work.

How would you suggest funding an expanded EITC for childless workers?

I think it would have to be part of an overall tax reform package. Unfortunately, I don’t think the Obama administration is serious enough about tax reform to consider including an EITC increase in such a package.

Do you think the push is more serious on the Republican side?

On the House side, Paul Ryan has been eloquent in his support. On the Senate side, Marco Rubio has very interesting ideas. But to have any kind of tax reform, you need to have leadership from the Administration.

How has the conservative approach to the EITC evolved since your time as Chairman of the Council of Economic Advisers under the Bush administration?

I think more people on the Republican side have started to realize the importance of encouraging and maintaining work. That’s always been something that I’ve felt is important, but I think now there’s a lot more emphasis on reforming programs—like the EITC—that encourage work.

What messages around the economic impact of the EITC resonate well with conservatives?

I think there are two messages that resonate well. One is defensive: the EITC is a good answer when the (much less good) idea of increasing the minimum wage comes up. If we, as taxpayers, believe that low-wage workers deserve a higher income, then we should all pay to make that happen. The burden shouldn’t be shifted to employers.

The second message is affirmative: that the EITC truly is our best option for supporting work.

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News Round-Up: September 15, 2014

September 15th, 2014

Here are some highlights from the past week’s news on family tax credit issues. Remember – you can also track news coverage throughout the week by visiting our RSS feed, where you can filter news by a specific credit and/or state.

  • As part of our “Ideas from the Right: Conservative Approaches to Tax Credits for Working Families” series, we sat down with National Review senior editor Ramesh Ponnuru to discuss his recommendation to both lower the top tax rate and increase the federal Child Tax Credit. (Tax Credits for Working Families)

  • A new research paper from the University of Massachusetts, Amherst finds that having children exacerbates income inequality between men and women. The author recommends expanding the Earned Income Tax Credit (EITC) to help lessen the gap in pay. (Business Insider)

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The 2014 Governor’s Races are Heating Up – With No Lack of Room for Tax Credits

September 12th, 2014

State primaries wrapped up this Tuesday, September 9 in Massachusetts, New Hampshire and Rhode Island. The three are among 36 states that will elect a governor later this fall.

As more than two-thirds of the nation prepares to head to the polls on November 4, gubernatorial hopefuls across the country are pitching economic plans that aim to invest in workers and increase support for families through programs such as the Earned Income Tax Credit (EITC), Child Tax Credit and property tax credits.

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Ideas From The Right: National Review’s Ramesh Ponnuru on Increasing the Child Tax Credit

September 9th, 2014

The following interview is the latest in our commentary series, “Ideas From The Right: Conservative Approaches to Tax Credits for Working Families.” For this issue, we sat down with Ramesh Ponnuru, senior editor for National Review magazine, Bloomberg View columnist and visiting fellow at the American Enterprise Institute (AEI). Mr. Ponnuru’s responses have been edited for brevity.

rameshIn a recent Bloomberg View piece, you suggest that a potential “sweet spot” for Republicans would be a proposal that both lowers the top tax rate and increases the federal Child Tax Credit. Why the focus on that credit in particular? 

Raising children is, in no merely metaphorical or sentimental sense, an investment in the future. Federal policy doesn’t recognize that fact. Rather, it includes a large bias against raising children – an implicit tax on that activity, and the Child Tax Credit is a way of counteracting that.

 

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News Round-Up: September 8, 2014

September 8th, 2014

Here are some highlights from the past week’s news on family tax credit issues. Remember – you can also track news coverage throughout the week by visiting our RSS feed, where you can filter news by a specific credit and/or state.

News Round-Up: September 2, 2014

September 2nd, 2014

Here are some highlights from the past two weeks’ news on family tax credit issues. Remember, you can also track news coverage throughout the week by visiting our RSS feed, which lets you filter news by a specific credit and/or state.

Ideas From The Right: An Exclusive Interview with National Affairs Editor Yuval Levin

August 26th, 2014

This issue is the latest in our new commentary series, “Ideas From The Right: Conservative Approaches to Tax Credits for Working Families.” 

For this issue, Tax Credits for Working Families director Lauren Pescatore sat down with Yuval Levin, founding editor of National Affairs, fellow at the Ethics and Public Policy Center, former White House domestic policy staffer under President George W. Bush and contributor for Room To Grow, a collection of essays from conservative thought leaders on policies to strengthen the middle class. Mr. Levin’s responses have been edited for brevity.

YuvalLevinYou served on the White House domestic policy staff under President George W. Bush. How has the conservative view on tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit evolved since that era?

The EITC and Child Tax Credit were both very important to the Bush administration. The EITC was expanded and reformed to address the marriage penalty during the Bush years, and the Child Tax Credit was improved.

I think there was some falling-off of interest around these credits early in the Obama years as conservatives had what I’d call “bigger worries” – concerns with the administration in those first two years. But there’s certainly been a regenerated interest in the credits as conservatives start to look towards the future.

 

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Ideas From The Right: An Exclusive Interview with AEI Scholar Michael Strain

August 19th, 2014

This issue is the latest in our new commentary series, “Ideas From The Right: Conservative Approaches to Tax Credits for Working Families.” This commentary is open for discussion on our blog.

For this issue, Tax Credits for Working Families director Lauren Pescatore sat down with Michael Strain, Resident Scholar at the American Enterprise Institute and co-author of Room To Grow, a collection of essays from conservative thought leaders on policies to strengthen the middle class. Mr. Strain’s responses have been edited for brevity.

  

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News Round-Up: August 18, 2014

August 18th, 2014

Here are some highlights from last week’s news on family tax credit issues. Remember – you also can track news coverage throughout the week by visiting our RSS feed, where you can filter news by a specific credit and/or state.

  • A new report from the U.S. Conference of Mayors finds that income inequality grew in more than two-thirds of metropolitan areas from 2005 to 2012 and recommends programs like the Earned Income Tax Credit (EITC) to boost earnings and productivity for low-income workers. (The Washington Post, Northeast Public Radio, Indystar.com)

  • NPR reported on the decades-long decline in men’s labor force participation, highlighting an expanded EITC for childless workers as a successful policy tool to encourage more men to join the workforce and continue working. (NPR)

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Ideas From The Right: “Investing in Workers through the Earned Income Tax Credit”

August 13th, 2014

This issue is the latest in our new commentary series, “Ideas From The Right: Conservative Approaches to Tax Credits for Working Families.” For this issue, Utah State Representative Eric Hutchings (R) provided us with an updated version of his Op-Ed in favor of enacting a state Earned Income Tax Credit (EITC) that originally ran in The Deseret News.  

 

Investing in Workers through the Earned Income Tax Credit
by Utah State Representative Eric Hutchings (R) District 38

During the 2014 General Session of the Utah Legislature, I introduced legislation designed to address intergenerational poverty among working Utahns by establishing a policy with proven results. The legislation, HB 218 Working Individuals and Families Credit, was designed to provide further assistance to low- and moderate-income workers who are struggling to make ends meet by cutting state taxes and bolstering the impact of the federal EITC.

The Working Individuals and Families Credit was modeled after and linked to the federal EITC. Since 1976, the federal EITC has provided working families with the boost they so badly need when hours are cut and incomes erode.

In 2012, nearly 1 in 5 Utah taxpayers received the federal EITC. The effectiveness of the federal tax credit is well documented. It provides an incentive to work, increases job skills and has kept more than 60,000 Utahns, 33,000 of whom were children, out of poverty. President Ronald Reagan called the EITC a “sweeping victory for fairness” and “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”

The Working Individuals and Families Credit is a Utah investment, particularly in the working poor, not through a government handout but with a ladder up to help working families climb their way out of poverty. Among those helped would be our military families, including our returning veterans, who could use the Utah tax credit to supplement their wages as they make their way back into the civilian workforce.

The Working Individuals and Families Credit would provide a Utah tax credit to those taxpayers who receive the federal EITC. Although substantially smaller than the federal EITC, many low-income workers who are only an illness, a layoff or perhaps a car repair away from financial devastation would be aided by even this small bonus.

Not only will the Working Individuals and Families Credit invest directly in workers, but it will invest in their children and our local economies. Today, nearly 1 in 6 Utah children lives in poverty – and nearly half of those children are living in intergenerational poverty. However, outcomes for children living in families receiving the federal EITC, and thereby the state tax credit, experience improved health and academic outcomes and greater lifetime earnings, decreasing the risk of a lifetime of poverty.

The Working Individuals and Families Credit does require an investment by the state but will generate economic activity in communities throughout our state. By reducing the taxes for these low-income workers, they will have additional resources to meet the basic needs of their families. As is the case with the federal tax credits, the state credits will be largely spent in our small businesses, helping those businesses continue to recover from the Great Recession. The Working Individuals and Families Credit is a win-win for Utah. It is time to make this modest investment in our low-income workers, who continue to play a valuable role in Utah’s re-energized economy.

The Working Individuals and Families Credit passed with a strong bipartisan vote in the House of Representatives 38-25. It received a favorable recommendation from the Senate Revenue and Taxation Committee, but the Session adjourned before the bill was voted on by the Senate. Continuing to support this bill’s path through the legislature and urging enactment will bring much-needed support to thousands of Utahns and their families by helping to ensure that their hard work pays off.

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