Earned Income Tax Credit Better Deal For Poor

Posted on June 17, 2010

The difficult economy is forcing Americans to stretch their paychecks further (“Raising wages key to sustained economic recovery,” June 13). As legislators and advocates look for ways to provide relief to those struggling to stay afloat, it is important to consider which policies work best.

New research from economists at the University of Alabama and East Carolina University found that 85 percent of poor families received no benefit from the most recent increase in the federal minimum wage. Here’s why: Recent Census Bureau data show that the average family income of a minimum-wage earner is over $48,000. The majority of minimum-wage earners don’t come from low-income families. Rather, they’re middle-class teens living with their parents or married couples where both spouses work. This means higher minimum and living wages don’t translate to bigger paychecks for poorer families that need them most.

A better option is the Earned Income Tax Credit. Targeted specifically at those with lower family incomes, an expansion of the EITC would have lifted 1.95 million Americans out of poverty — 2.5 times more than the 40 percent federal wage increase that took place between 2007 and 2009.

Michael Saltsman, Washington
Saltsman is a research fellow with Employment Policies Institute in Washington.