Focus on benefits of Earned Income Tax Credit

Posted on February 20, 2016

Mike Owen writes, “Raise the wage, raise the EITC. It’s a win-win for low-wage workers and our economy.” But research suggests that one of these proposals — raising the minimum wage — is actually far from a win for both the working poor and the economy [Minimum wage, EITC both need boosts, Feb. 12].

Last December, the Federal Reserve Bank of San Francisco released a report concluding that recent minimum wage increases have caused a reduction in 100,000 to 200,000 jobs nationally. This report’s findings are consistent with an earlier conclusion from economists at Miami and Trinity University who used the CBO’s methodology to estimate that a $12 minimum wage implemented nationwide would cause 770,000 Americans to lose their jobs, and 12,960 of those lost jobs would be in Iowa. So while some may benefit, it is at the expense of others.

Instead of raising the minimum wage in a misguided attempt to improve the economy, Iowa should focus on the half of the equation that we know works, the EITC. By using the tax code, the EITC is able to supplement the income of low-income households without creating additional burdens on low-margin employers. All of the benefits and none of the unintended consequences, that sounds like the real win-win.