Winning the battle and losing the war is an old story.
Fervent Bernie Sanders-type Democrats here in North Carolina are still hollering for a return of the Earned Income Tax Credit – or EITC – which the General Assembly ended three years ago.
The EITC was a bit of a misnomer. It wasn’t just a tax credit that returned dollars to a worker that had been withheld from his or her paycheck. There was another component of the law, called ‘refundable,’ which let a person get a refund check even if he or she did not pay taxes. In other words, a person who paid no tax could get, say, a $200 refund. Or a person who paid $200 in taxes could get a $400 refund.
That leaves the realm of tax credits and crosses into the realm of welfare.
Here’s my point: If the goal is to help the working poor there’s a better way. For example, a current proposal would raise the ‘zero bracket’ for a married couple from $15,500 to $17,500. That means every couple would pay no tax at all on their first $17,500 in income. They would get to keep every penny of the $17,500. No matter whether their annual income is $20,000, $30,000, $40,000 or $50,000. Which means a significant tax cut.
Equally important, that tax cut is bigger than the tax credits that would be available by going back to the EITC – so it helps the poor more. And, at the same time, it helps the middle class.
Our more liberal Democrats are determined to refight the EITC battle. But does that battle matter if we find a better way to help the working poor?