We're Taxing Childless Adults Into Poverty
With taxes on everyone's mind this Tax Day, here's a change in the tax laws that deserves serious consideration: improving the federal Earned Income Tax Credit (EITC) for working childless adults, the lone group the federal tax code taxes into poverty.
For childless workers, the EITC isn't large enough to reward work or offset their federal payroll and income taxes. And childless workers under age 25 are completely ineligible for the credit, so the EITC does nothing for young childless adults trying to get a start in the workforce. As a result, the federal tax code taxes about 7.5 million childless adults ages 21 through 66 into — or deeper into — poverty.
For example, in 2016, a 30-year-old childless adult making $12,494 — roughly the poverty threshold — will incur a federal income- and payroll-tax liability of $986 after subtracting an EITC of just $184. Federal taxes will push her nearly $1,000 into poverty. That's a significant amount for someone with income this low.
The EITC is designed to encourage and reward work, and it does so very effectively for families with children. Extensive research shows that it induces many people who aren't working to take a job. Yet this proven pro-work instrument largely leaves out working childless adults and working non-custodial parents. Labor-force participation has fallen among less-educated young adults who aren't raising children, making them a prime candidate for a more adequate EITC.
Fortunately, leading policymakers from both parties recognize the problem. President Barack Obama and House Speaker Paul Ryan have offered nearly identical proposals to lower the eligibility age for the childless workers' EITC to 21 and boost their maximum credit to about $1,000. These changes would make significant progress toward meeting the core principle that no American worker should be taxed into poverty.
Senator Sherrod Brown, D.-Ohio, and Representative Richard Neal, D.-Mass., have introduced more robust proposals that would essentially ensure that the federal tax code doesn't tax childless wage-earners aged 21 through 64 into poverty.
These proposals would reward the hard work of a broad swath of people in every state — young and older, male and female, and across all races — who do important low-paid jobs in hospitals, in schools, and at construction sites.
Of the 13 million workers who would benefit from the Obama and Ryan proposals, roughly 35 percent are at least 45 years old, and 1.5 million or more are non-custodial parents. About 6 million are women, and some 630,000 are veterans or military service members. Workers in a diverse range of occupations and demographic groups would benefit. An additional 3 million workers — 16.2 million overall — would benefit from the Brown and Neal proposals.
Providing a more adequate EITC to low-income childless workers and lowering the eligibility age would have important benefits beyond raising these workers' incomes and helping offset their federal taxes. Some leading experts believe that an expanded EITC for these workers would also help address some of the challenges that less-educated young people face, including low and falling labor-force participation rates, low marriage rates, and high incarceration rates.
The two parties may not agree on many issues these days, but making work pay for childless adults should be one of them.
Chuck Marr is the director of federal tax policy at the Center on Budget and Policy Priorities.