The Earned Income Tax Credit is one of America’s most successful programs battling poverty. Originally passed in the Ford administration, the EITC supplements the wages of poor, working families, giving them a boost as they work their way up the economic ladder. Its innovative “plateau” formula means that it acts to promote, not discourage, work: the credit rises alongside income up to a certain level, then (after flat-lining for awhile), begins to phase itself out as families transition to middle-class status. Because of this, the EITC enjoys broad bipartisan support — including former head of President Bush’s Council of Economic Advisers, N. Gregory Mankiw.
However, despite a sterling record of accomplishment, the EITC has one of the lowest participation rates of any federal tax credit. A full quarter of eligible individuals (seven million people) miss out — either because it’s too complicated or because they just don’t know about it.
In light of that, Sen. Chuck Schumer (D-NY) and Rep. Rahm Emanuel (D-IL) have sponsored a bill simply requiring corporations to give eligible employees information about the EITC along with their W-2 form. The bill is supported by group as disparate as the SEIU and Wal-Mart (which has announced it will voluntarily adopt the guidelines starting next tax cycle).
But, as Rep. Emanuel said in the official announcement, this is a bill he hopes never has to get passed — for it is a regulation that could be implemented much faster and much more easily simply via an order from Treasury Secretary Paulson. Paulson could, with a stroke of a pen, help millions of working families and give the economy a well-timed stimulus. But, if he refuses to act, then hopefully the Schumer/Emanuel bill will force the issue and give millions of Americans the tax relief they are already entitled to under the law.