Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty

Improvement Targeted at Lone Group Taxed into Poverty

BY Chuck Marr, Chye-Ching Huang, Cecile Murray, and Arloc Sherman

Working childless adults[2] are the lone group that the federal tax code taxes into or deeper into poverty, largely because they are also the only group largely excluded from the Earned Income Tax Credit (EITC). For low-income working families with children, the EITC encourages and rewards work and offsets federal payroll and income taxes. The EITC for childless adults, by contrast, is so small that it effectively does none of those things. The federal tax code taxes about 7.5 million childless adults into or deeper into poverty. Today, the federal tax code taxes about 7.5 million childless adults aged 21 through 66 into or deeper into poverty.

Consider, for example, a 21-year-old just starting out in the workforce and making poverty-level wages of about $12,500 for manual labor. This worker has $956 in payroll taxes deducted from his paycheck and pays $214 in federal income taxes. Because the worker receives zero EITC (childless workers under age 25 are ineligible), he is taxed $1,170 into poverty — that is, the taxes leave him $1,170 below the poverty line. A 30-year-old woman making the same low wages in a retail store owes the same taxes, and she does qualify for an EITC (she is age 25 or older), but her credit is only $184 — with the result that she, too, is taxed into poverty.