A lot of folks in Washington like to talk about the economic recovery as though our work is finished. To listen to some politicians in their nice suits and fancy offices—working families are doing just fine. But while the country may have climbed out of the depths of the recession, too many hard-working families are still struggling. That’s because the gains from economic growth have gone largely to the wealthiest Americans, while low and middle-income workers have seen little to no income growth over the past two decades.
Earlier this month, the Senate Banking Committee, on which I serve as Ranking Member, held a hearing on the economic recovery, and I was proud to see ordinary Americans outnumbering lobbyists in the audience. Instead of expensive tailored suits, they wore T-shirts with a simple but powerful message: “Whose Recovery?”
That’s a question we must keep asking ourselves.
If we are serious about helping working families and reducing the persistent poverty holding too many Americans back, we need to get serious about expanding and strengthening one of the most effective poverty-fighting tools we have: the Earned Income Tax Credit (EITC).
The EITC was created with broad bipartisan support in 1975, and it has been expanded by every president since. It encourages people to work by putting thousands of dollars back into the pockets of low-wage and moderate-wage workers. Last year, 27 million American households—950,000 households in my home state of Ohio alone—claimed the EITC and earned an average refund of $2,400. That means millions of families getting a check in the mail this spring—a check making their hard work pay so they can make a down payment on a new car, put a deposit on an apartment, pay off medical debt, or save for a rainy day.
Each year, the EITC protects more children from poverty than any other government program. What’s more, research shows that it is an investment that pays long-term dividends, improving children’s health, educational attainment, and even earnings in adulthood.
One of our most important accomplishments last year was the bipartisan tax package that permanently expanded the EITC, providing certainty for the millions of families who rely on the credit and are counting on it again this year. But there is one glaring hole in the program that we still need to fix.
Under current law, workers without children barely earn any EITC. And childless workers under age 25 don’t qualify for the credit at all.
We are talking about people working full-time, 40 hours a week, all year round. But at minimum wage or even $9 per hour, they earn less than $20,000 a year. And without a significant EITC, these workers can actually be taxed deeper into poverty.
That is shameful. It goes against our core values as a nation, and it has to end.
These people work hard and play by the rules. They contribute by paying Social Security and other payroll taxes. How will they save for the future and plan for their families if they constantly struggle to get by, paycheck to paycheck—all the while being taxed deeper into poverty?
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In the final budget of his presidency, President Obama has proposed expanding the EITC by reducing the eligibility age from 25 to 21 and nearly doubling the maximum value of the credit.
This is a step in the right direction, but it does not go far enough.
The Working Families Tax Relief Act, which I introduced last year, would nearly triple the maximum value of the EITC to ensure that no one is taxed into poverty. Just expanding the childless EITC as that legislation would do, would lift more than half a million people out of poverty and reduce poverty for an additional 10 million Americans.
We must also combine the tax credit with an increase in the minimum wage, to make sure a hard day’s work is rewarded with an honest day’s pay.
Expanding the EITC will mean more people attending college and getting GEDs. It will mean more Americans working at higher salaries. And it will enable millions of people to earn their way out of debt or to begin saving a nest egg, potentially for the first time in their lives.
And that means stronger communities, and more stable families.
If we are serious about creating an economic recovery for all Americans—not just those who work on Wall Street or in Washington—we need to let working people keep more of their hard-earned money. Then when we are asked the question, “Whose recovery?” we will be closer to answering: “All hardworking Americans.”