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November 7, 2007

Competing Ideas on the Future of EITC

I stumbled upon a paper from earlier this year that warns that the EITC is in political danger and such a position surprised me, both because of anecdotal  experiences I have had teaching about EITC in my poverty class, where even fairly conservative students tend to like the EITC though they oppose "welfare," and because a colleague at my school had written about how the EITC was not in political danger.  The debate from earlier this year can be seen in the contrast between:

  • Dorothy A. Brown, Race and Class Matters in Tax Policy, 107 Columbia L. Rev. 790 (2007).
    • ABSTRACT: The Earned Income Tax Credit (EITC), which is available only to low income workers, is headed for extinction or at least the “end of the EITC as we know it.” Recently we were informed that 1.6 million low-income taxpayers had their tax refunds frozen over the last five years, although the vast majority did nothing wrong. Low-income taxpayers are far more likely to be audited than their high-income counterparts. In fact, since 1998 over $1 billion has been spent auditing low-income taxpayers. This Essay shows that the EITC is headed for extinction because the EITC has a “welfare” taint. The EITC first received a welfare taint during the Clinton Administration, and it has continued during the Bush Administration. In order to reverse the trend, EITC taxpayers will have to be painted in a more sympathetic or “deserving” light. This Essay suggests that the truth actually will help here, given that the racial analysis of the EITC shows that the vast majority of EITC taxpayers are white. Because scholars have ignored the race and class effects of the EITC, they offer no solution to improve the plight of low-income taxpayers. Building upon Professor Derrick Bell’s interest-convergence thesis, I predict that if the race and class information can be properly “packaged,” the EITC’s elimination can be prevented.
  • Dennis J. Ventry, Jr., Welfare by Any Other Name: Tax Transfers and the EITC, 56 Am. U. L. Rev. 1261 (2007).
    • ABSTRACT Tax credits, particularly refundable tax credits, are viewed increasingly as a social policymaking magic bullet. Indeed, the tax instrument can be a particularly effective and efficient mechanism for delivering social welfare benefits. However, deploying uniform refundable credits or universal tax subsidies will not solve all anti-poverty woes. In particular, over-reliance on the tax instrument blinds policymakers to a more fundamental conundrum that has plagued government transfers for over thirty years: What exactly is the government trying to accomplish by delivering social welfare benefits through the tax system? The Article explores this systemic question, and poses two further questions. First, what and who are policymakers targeting when they advocate tax-transfer programs like the EITC? And second, are current tax-transfer efforts effectively assisting the targeted beneficiaries? In addition, the Article examines the current political and administrative state of the EITC, and recommends several ways the program can further expand its reach and efficacy. In the process, it offers a sharp rebuttal to recent scholarship suggesting that the EITC is in political danger.

Two other related articles worth checking out on this topic are:

-E.R. [email protected]

November 7, 2007 | Permalink

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