Spotted: Oakwood vs. Milton Union
Area H.S. football: Week 8
Spotted: Jason Aldean concert
Another view: Pull EITC program from tax system
Saturday, January 27, 2007
The Earned Income Tax Credit has been the subject of many reform recommendations. George Yin, a law professor from the University of Virginia, offered many suggestions in a 1996 article published by the American Enterprise Institute, edited excerpts of which appear below:
Extras
From modest beginnings, Congress has continually expanded the Earned Income Tax Credit (EITC) until it now has become one of our largest assistance programs for low-income Americans, and by far the fastest growing. A transfer program of this magnitude shouldn't be hidden in our tax code.
Why tinker with a popular program? For one thing, because it may not be achieving its stated purpose of encouraging low-income persons to work more. You see, almost all current recipients obtain the benefit just once a year, in the form of a lump-sum check received after their tax return is filed.
Moreover, many of the recipients use a tax return preparer to get their benefit, with the intermediary conveying little or no information about the reason for the benefit. The result is that EITC benefits may be perceived as an income tax refund, a product of the tax preparer's ingenuity, or simply a windfall, and not a reward for work effort. This mutes any significant influence the program might have on work levels.
To promote work, it would be more effective if EITC funds were used to finance the work requirements of welfare reform.
A common claim about running the EITC as a tax program is that it is relatively free of bureaucracy, and therefore delivers benefits with low administrative costs. But this is misleading, because it only takes into account the governmental expenses of running the program. As every taxpayer knows, the Internal Revenue Service's budget is only a tiny fraction of the total price of operating our complicated tax system.
The bulk of the administrative costs for any tax measure fall on taxpayers, who are forced to spend much time and money "voluntarily" complying with the tax law. Why should federal dollars intended for the working poor be used to support accountants and tax advisors?
Moving the EITC out of the tax system would impose new budgetary discipline on the program. Acknowledging that the EITC is really a low-income transfer program would allow it to be more fairly weighed and assessed against competing uses of the same funds.
