Families with children do not start to owe income tax until their earnings are above the poverty line. And, working poor families with children can qualify for an EITC and Child Tax Credit (CTC) that together offset their substantial payroll tax liability and help supplement their earnings.
The situation for low-wage earning childless adults is very different. Single childless adults begin to owe income taxes when their earnings reach just $10,000, some $2,000 below the poverty line for a single adult. A childless worker with earnings equal to the poverty line — $12,119 in 2013 — has an income tax liability of $212 (before the EITC) and owes $927 in the employee share of payroll taxes. (The employer owes another $927 in payroll taxes, the burden of which, most economists agree, falls on workers in the form of lower wages.) While the worker thus has a combined income tax and payroll tax liability of $1,139 (counting only the employee share of the payroll tax), she receives an EITC of just $169. This tiny EITC is less than her income tax bill alone. The combined effect of the income tax, including the EITC, and just the employee share of payroll taxes pushes this worker $970 below the poverty line.
Lone Group Taxed Into Poverty Should Receive a Larger EITC
All childless workers under age 25 are ineligible for the EITC, so low-income young people just starting out — who have disturbingly low labor-force participation rates — receive none of the EITC’s proven benefits, such as promoting work, alleviating poverty, and supplementing low wages.
CBPP – Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty
- Under the 2015 federal laws the maximum income for the EITC for single, childless workers is at $14,820 annually.
- Under the 2015 federal laws the maximum income for the EITC for married, childless workers is $20,330 annually.
Create a state EITC with the following items to help childless workers:
- Lower state EITC age to 18
- Double the amount received for childless workers
- Raise the state EITC age limit from 65 to 67