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The Myth of the Earned Income Tax Credit

Topics: Current Events

Conservative economists argue that the Earned Income Tax Credit (EITC) negates the need for a minimum wage.

(Photo Credit: Images_of_Money/Flickr)

Christopher Matthews, writer and reporter for Time, says that it is a myth that the benefit of the EITC makes minimum wages unnecessary.

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What Is the EITC?

The IRS defines the EITC as “a benefit for working people who have low to moderate income. A tax credit means more money in your pocket. It reduces the amount of tax you owe and may also give you a refund.”

Who Is Eligible for the EITC?

The IRS defines the people eligible for the EITC as having all of these qualifications, among others:

  • Earning income; in other words, their income is from working a job for somebody else or a form of self-employment. Income from child support payments or an investment are ineligible;
  • Being between the ages of 25 and 65;
  • Residing in the state at least half of the year;
  • Not filing “married filing separately.”

Why Do We Still Need a Minimum Wage?

Because people making low wages get these benefits from the government, more conservative economists argue that we can ease the burden on small business owners and reduce or eliminate the minimum wage.

However, employers already get a benefit from the EITC; they offer workers the lowest wages possible and can still entice them to work. The existence of the EITC is one reason some workers are able to take such low wages.

This is not a reason to get rid of either the EITC or the minimum wage; rather, we fight poverty when the two laws work together in tandem to help the working poor make ends meet. The EITC was never intended as a form of corporate welfare so that employers would not have to pay employees a reasonable wage, and giving employers the power to offer slave wages negates the benefits of the EITC.

Benefits of the EITC

We’ve seen the benefits of the EITC numerous times. For example, the Center on Budget and Policy Priorities reports that children in families who received help from the EITC did better in school not only while they were receiving the benefits, but were more likely to attend college and earn more as adults.

Helping families with the EITC seems to help end the cycle of generational poverty. We need both a minimum wage and the EITC to help poor adults and families dig their way out of poverty.

Tell Us What You Think

Do you think we need a higher minimum wage, the EITC, or both? Leave us a comment or join the conversation on Twitter.

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