Friday, March 28, 2014

The EITC Cannot Fight Poverty Alone



The Earned Income Tax Credit (EITC) is a powerful tool for helping low-income working families, but to effectively raise Marylanders out of poverty and foster broad-based prosperity, it must work alongside other measures, including a boost in the minimum wage.

Recently, some policymakers in Maryland have portrayed  the EITC as some kind of super-policy that can fight poverty on its own, but  this is not the case.

The EITC – a federal tax credit that Maryland supplements with a state EITC -- makes low-wage work more viable for families by offsetting some of the taxes they pay and boosting their income. However, as the non-partisan Center on Budget and Policy Priorities pointed out this week, there are some things that the EITC cannot do, like helping people who are out of work or unable to work, or helping the poorest families that do not make enough to qualify for the credit.

In addition, because families reap the benefits of the EITC once a year when they file their taxes, it does not help them when they may need a boost the most, like when the monthly rent is due or they need to repair the car they use to get to work. More broadly, because the EITC is based on wages, it does not automatically expand to stabilize the economy during recessions, the way that other services, like nutrition assistance, do.

The EITC also does not provide workers with health insurance.

Because of these limitations, we need other policies to complement the EITC, including nutrition assistance, access to health insurance through programs such as Medicaid, and unemployment insurance to see individual workers through job losses and help the economy as a whole through downturns. And, of course, a robust minimum wage that keeps up with the cost of living and allows workers to support themselves and their families.

Maryland policymakers need to recognize the importance of making these programs and policies work together on behalf of working families. For instance, as they consider legislation that would make the state’s EITC more generous, state lawmakers also should finish the task of raising the minimum wage. That would build on the strides Maryland has made recently in improving access to health care by expanding Medicaid and working to implement the Affordable Care Act.

It’s fortunate that so many policymakers agree the EITC is an important and effective way to provide economic assistance to working families in Maryland. The current proposal to expand the state EITC enjoys bipartisan support in the General Assembly, and the EITC has also won praise from conservative lawmakers such as U.S. Rep. Paul Ryan. Unfortunately, some of this acclaim portrays the EITC as an alternative to other policies such as raising the minimum wage, rather than as a supplement to those things.

The EITC is an important policy, but we should not rely on it to do everything. There is no silver bullet capable of singlehandedly ending poverty. Instead we need lots of programs and ideas to peck away at it from every angle.

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