Home > Uncategorized > How paying no federal income taxes helps the poor get off welfare and into work

How paying no federal income taxes helps the poor get off welfare and into work

September 19, 2012 Leave a comment Go to comments

Why don’t 47 percent of Americans pay federal income taxes? One major reason: Tax credits that were passed with major bipartisan support — namely the Earned Income Tax Credit and the Child Tax Credit. And there’s a wealth of research showing that both of these tax breaks have been effective at lifting these Americans out of poverty and encourage them to move from welfare to work.

Job-seekers stand in line during a job fair in Portland, Oregon. (Rick Bowmer/AP)

The Earned Income Tax Credit, in particular, was created to encourage low-income people to work, diverting government resources from handouts toward incentives built into the tax code. That’s why Reagan expanded the tax break — which was created in 1975 — and Clinton used its expansion to complement welfare reform, with full support from Congressional Republicans.

There’s significant evidence that it’s been successful in doing so. “[T]he overwhelming finding of the empirical literature is that EITC has been especially successful at encouraging the employment of single parents, especially mothers,” according to economists Nada Eissa and Hilary Hoynes, in a 2005 study cited by the Center on Budget Priorities.

via How paying no federal income taxes helps the poor get off welfare and into work.

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