The pandemic is driving American families to the edge, with tens of millions at risk of losing their homes and over 1 in 10 U.S. adults reporting their households didnt have enough to eat in the previous week.
While Congress debates extending unemployment benefits that expired on July 31 and other additional aid, theres an important program that already exists that could help struggling Americans get through the crisis however long it lasts. Known as the earned income tax credit, or EITC, it provides aid primarily to the working poor. In a typical year, it lifts more than 8.5 million people out of poverty, while improving the health and well-being of parents and children.
Since the credit depends on earned income, many families may be at risk of losing all or some of the benefit because so many were laid off as economies in many states shut down. Even as restaurants and other businesses reopen, its likely that many of those who lost their jobs will remain unemployed or underemployed for many months or longer.
Our own research shows changes to the structure of the U.S. economy, with the sharp growth of low-wage and unstable jobs, is weakening the EITCs effectiveness at fighting poverty.
Some lawmakers are trying to reform the EITC as part of the next coronavirus bailout to ensure it helps more Americans and make it more like a basic income guarantee. We believe doing so would not only ensure low-income Americans continue to have access to this vital tax credit during the pandemic, additional changes could also strengthen the program for years to come.
The EITC success story
The earned income tax credit, which supplements earnings for many low- and moderate-income workers, has helped buffer economic hardship for single parents and other recipients since it was created in 1975.
Eligible taxpayers receive the credit after they file their taxes. And unlike a deduction, even those who didnt pay any income tax can receive the credit, which theyll get as part of their refund. Twenty-eight states and the District of Columbia also offer their own EITCs, typically based on the federal credit.
In 2019, taxpayers received about US$63 billion in credits through the federal EITC, making it the governments largest cash safety net program for working families with children. Recipients qualify for the credit based on how much money they earn and depending on their marital status and number of children. The benefit rises with each dollar earned until reaching a peak and then phasing out.
For example, in 2019, a single person earning $13,545 a year received $392, while a typical family of four with an annual income of $22,261 received roughly $2,951 which comes out to an extra $250 a month.
Put another way, a family with one child receives an average credit of 34 cents for every dollar of earned income, which rises to 40 cents for two and 45 cents for three or more children.
The tax credit has been tremendously successful. In 2018, the latest data available, the EITC lifted about 10.6 million people out of poverty and reduced its severity for another 17.5 million. And since its inception, it has reduced child poverty by 25%.
But the benefits extend well beyond providing struggling families with more income. Research shows the credit has helped improve the mental and physical health of mothers, improves perinatal health of mothers and their children, improves child development, reduces incidents of low birth weight among infants and improves childrens cognitive function.
It also enjoys strong bipartisan support because of its focus on encouraging and supporting working.
But the EITC only helps individuals able to find work, which becomes a bigger challenge in a pandemic or severe recession.
Our unpublished calculations from a national representative survey showed that about a fifth of the 25 million EITC beneficiaries in 2019 lost their jobs from March to April and over 16% remained unemployed in June, the latest data we have available. That means over 4 million working families could lose a large portion of their benefits in 2021, depending on a variety of factors.
Reforming the EITC
While these problems are most obvious in a recession, theyve worsened over the past four decades as the labor market has changed.
The share of workers doing low-skill, low-wage work has jumped from 42% in 1980 to about 54% in 2016. And an increasing number of these jobs are in the precarious gig economy that doesnt provide stable incomes. That means workers are less likely to see a steady aid from the EITC because the maximum benefits are gained when working full time at minimum wage.
The EITCs also provides very little support to those without children. A nonpartisan think tank estimates that about 5.8 million adult workers without any children as dependents are taxed into poverty or impoverished further each year because their EITC is too small to offset their federal income and payroll taxes.
House Democrats are pushing to reform the EITC in the next coronavirus relief bill. Specifically, theyd like to tweak the credits phase-in so that workers receive more benefits for fewer hours worked, allowing those who lost their jobs and remained unemployed for the remainder of 2020 to maintain benefits similar to last year. They also would lower the minimum age for receiving the credit to 18 from 25 for certain vulnerable groups like those experiencing homeless.
Wed suggest also increasing the benefit for tax filers without children and lowering the minimum age for everyone so that the millions of young people graduating from high school and college into an economic recession can get additional support.
These reforms would not only help now but could also deepen the impact of the EITC by creating an income floor for more people as the economy changes, essentially creating something very much like a basic income guarantee. A key difference, however, is that most universal basic income proposals dont require recipients to work.
While we cannot fully predict how interactions between job losses and the tax and benefit system will play out, this moment presents an opportunity to test reforms that would benefit low-income working families for years and decades to come.
Rebecca Hasdell, Postdoctoral fellow, Stanford University; Alice Milivinti, Postdoctoral Researcher, Stanford University, and David Rehkopf, Associate Professor of Medicine, Stanford University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
Image: Reuters
Read the rest here:
- Universal basic income has time come for it? Debate intensifies in pandemic - WRAL Tech Wire - December 3rd, 2020
- Basic income for all: Has the Covid crisis given us a new economic model? - The Irish Times - December 3rd, 2020
- What is the Liveable Income Guarantee, and how could it affect you? - Yahoo Finance Australia - October 8th, 2020
- Two Years of Duques Colombia: Deepening Neoliberalism, Increased Violence and a Public Health Crisis - NewsClick - August 13th, 2020
- Why Kamala Harris VP pick could cost Biden the election - Fox Business - August 13th, 2020
- Magic Reports Second Quarter and First Half 2020 Financial Results with Record-Breaking Operating Income of $9.8 million, reflecting a 22% Year Over... - August 13th, 2020
- Millions of America's working poor may lose out on key anti-poverty tax credit because of the pandemic - The Conversation US - August 7th, 2020
- Could $50 a Week Empower High School Students to Set and Meet Education Goals? This New Orleans School Aims to Find Out - redlakenationnews.com - August 7th, 2020
- Heres How We Remake the Economy - Common Dreams - August 5th, 2020
- VOICE OF THE PEOPLE July 31, 2020 - TheChronicleHerald.ca - July 31st, 2020
- Health unit calls for universal basic income - The North Bay Nugget - July 30th, 2020
- Job guarantee program could bolster economy more than ... - July 27th, 2020
- The Gray Market: Why the Entire Art World Should Back Canadian Arts Workers Push for Universal Basic Income (and Other Insights) - artnet News - July 26th, 2020
- Extra $600 unemployment benefits set to expire this weekend - WKOW - July 25th, 2020
- Why Now is the Time to ACT on KUB - SACE - Clean Energy News - July 25th, 2020
- What is Basic Income? | Guaranteed Universal Basic Income - July 25th, 2020
- ECLAC calls for urgent regional cooperation beyond the pandemic to foster more integration and avert a food crisis - Dominican Today - July 25th, 2020
- 'A recovery that puts people first': A group of young Australians is demanding a government job guarantee to fight both soaring unemployment and... - July 24th, 2020
- Analysis: Behind the legal maneuvering in the Reclaim Idaho initiative - Idaho EdNews - July 24th, 2020
- In the wake of Covid-19, time to consider basic income: Senate report - Investment Executive - July 21st, 2020
- COVID-19 on P.E.I.: What's happening Tuesday, July 14 - CBC.ca - July 21st, 2020
- COVID-19 on P.E.I.: What's happening Monday, July 13 - CBC.ca - July 20th, 2020
- Lift Every Voice: The Urgency of Universal Civic Duty Voting - Brookings Institution - July 20th, 2020
- Largest cities in Colombia reverse reopening as coronavirus threatens to collapse healthcare - Colombia Reports - July 17th, 2020
- GST: The increase Australia doesn't have to have Monash Lens - Monash Lens - July 15th, 2020
- Bogot returns to strict quarantine based on rotating localities as of July 13 - The City Paper Bogot - July 11th, 2020
- Why a Universal Basic Income is the solution to inequity - Women's Agenda - June 22nd, 2020
- Crypto Experts Reveal Thoughts: How Will Bitcoin Perform After the COVID-19 Crisis Has Passed? - PRNewswire - June 22nd, 2020
- Interviews: Punks on Politics: Checking in with Mel Gagarin - Punknews.org - June 22nd, 2020
- COVID-19: UN agencies warn against rising hunger in Latin America and the Caribbean - UN News - June 22nd, 2020
- Universal Basic Income: Andrew Yang Was Pushing for It Long Before Coronavirus Pandemic - PopCulture.com - May 9th, 2020
- Coronavirus is a crisis for the developing world, but here's why it needn't be a catastrophe - The Guardian - May 9th, 2020
- Starvation in the time of Corona: momentum for the Universal Basic Dividend - DiEM25 - May 9th, 2020
- Adam Schiff Says Trump's Cult of the President Has Infected the Republican Party - Mother Jones - May 9th, 2020
- Common Arguments Against Basic Income Don't apply to the Emergency BI - Basic Income News - March 31st, 2020
- How a Basic Income And Jobs Guarantee Can Save The Economy From Coronavirus - The National Interest - March 31st, 2020
- I've lived through plenty of social shocks this time we must learn the lessons - The Guardian - March 31st, 2020
- Coronavirus: Iain Duncan Smith says dont bring in universal basic income during pandemic as it would be disincentive to work - The Independent - March 26th, 2020
- Solidarity Economicsfor the Coronavirus Crisis and Beyond - The American Prospect - March 26th, 2020
- We face a war against coronavirus and must mobilise accordingly | Free to read - Financial Times - March 26th, 2020
- Lockdown to fight coronavirus is going to hit most Indian workers very hard - Livemint - March 26th, 2020
- Beware of a lopsided lockdown - The Hindu - March 26th, 2020
- Life, Liberty, and Basic Income | Opinion - Harvard Crimson - February 29th, 2020
- Find ways to improve the revenue of farmers: Congress - The Hindu - January 30th, 2020
- Eliminating Child Poverty With a Government Check - The New York Times - January 30th, 2020
- Andrew Yang Expects 'Many' of His Supporters to Back Sanders in Iowa: We 'Have a Lot of Overlap' - Newsweek - January 30th, 2020
- Trump to let states overhaul Medicaid for the poor, seeking to change Obamacare without legislation - Washington Examiner - January 30th, 2020
- P.E.I. groups say basic Income should not replace addictions, other supports - The Journal Pioneer - January 27th, 2020
- 5 Psychological Forces That Turn People into Political Hacks | Aaron Pomerantz - Foundation for Economic Education - January 13th, 2020
- WAYNE YOUNG: Island voices must be heard - The Guardian - December 15th, 2019
- The Guardian view on Finlands new PM: a different type of leadership - The Guardian - December 15th, 2019
- Basic Income as 40 Acres and a Mule - Basic Income News - October 16th, 2019
- 'Most Americans Don't Want To Work for the Federal Government' Says Andrew Yang, Trashing Federal Jobs Guarantee - Reason - October 16th, 2019
- Democratic debate highlights: best and most substantive answers of the night - Vox.com - October 16th, 2019
- Sanders: 'Damn right we will' have a job for every American | TheHill - The Hill - October 16th, 2019
- Assembly Elections 2019: Why is the Congress evasive about NYAY scheme this poll season? - Moneycontrol.com - October 16th, 2019
- Letter to the Editor: Universal basic income is inevitable as we head toward a fully automated society - The Post - October 16th, 2019
- Democrats focus on some Midwestern issues at Westerville debate, a departure from past three forums - cleveland.com - October 16th, 2019
- New book reviews the Namibian Basic Income pilot - Basic Income News - October 1st, 2019
- Quick notes from Basic Income Guarantee Panel - falicon.com - January 28th, 2019
- 'Hartz reforms': how a benefits shakeup changed Germany ... - January 28th, 2019
- Basic income could end food insecurity - Upstream - January 3rd, 2019
- Basic Income Guarantee - Your Right to Economic Security ... - November 8th, 2018
- The Ethics and Economics of the Basic Income Guarantee ... - September 18th, 2018
- Is a Basic Income Guarantee the Right Choice for Ontario? - June 27th, 2018
- Basic Income Now | It's time for dignity for all - March 17th, 2018
- 'Me too' and the basic income guarantee | Basic Income News - February 6th, 2018
- Food shopping at dollar stores | Brantford Expositor - Brantford Expositor - August 24th, 2017
- How Cities Can Rebuild the Social Safety Net - CityLab - August 24th, 2017
- After lifting minimum wage, NDP government prepares to consult public about reducing poverty - Straight.com - August 16th, 2017
- Universal Basic Infrastructure to help decrease India's poverty - Economic Times - August 14th, 2017
- New Zealand Fabians host Basic Income panel - Basic Income News - August 13th, 2017
- Hashtag Trending Battery-free phone, Apple's China backlash - IT World Canada - August 10th, 2017
- Universal basic income proponent to speak in Boise - Idaho Press-Tribune - August 7th, 2017
- Let's talk about a supplemental income - The Hindu - August 7th, 2017
- Is a Well-Paying Job the next Entitlement Program? - Big Think (blog) - August 5th, 2017
- DON PRIDMORE: Be careful what you wish for... - The Guardian - August 1st, 2017
- EDITORIAL: Island needs dollars, not data, to cope with poverty - The Guardian - July 29th, 2017
- Renfrew County dietitian recognized by board of health for provincial award - www.insideottawavalley.com/ - July 27th, 2017
- More Calgarians struggle to feed their families over the summer months - CBC.ca - July 26th, 2017