Your move, Republicans. That was essentially President Barack Obama's message today with his proposal to expand the earned income tax credit, a wage supplement for low-income workers. Conservative economists have long been pushing for an expanded credit, arguing it is a better way of lifting personal income than raising the minimum wage. They are right -- and now congressional Republicans have an opportunity to show they agree.
The EITC has always been that rarest of Washington creatures: a tax policy that consistently draws support from both parties as well as from policy wonks. Its origins lie in a Milton Friedman proposal from the 1960s for a negative income tax to incentivize work. President Gerald Ford signed the first EITC into law; President Ronald Reagan raved about it; Presidents George H.W. Bush, Bill Clinton and Obama expanded it; and Representative Paul Ryan’s stinging critique of federal poverty programs, released yesterday, offered support for it.
In 2011, the tax credit provided 27 million people with more than $60 billion, making it the federal government’s largest cash assistance program. But most of the EITC’s benefits have always gone to parents with young children, doing little to help low-wage single workers, including those who work in minimum wage jobs.
Obama has proposed doubling the current maximum federal benefit for single workers to $1,000, expanding eligibility to higher incomes, lowering the qualifying age to 21 from 25, and increasing the upper age limit to 66 from 64.
So far, so good. But plans to expand the program have traditionally foundered on the question of how to pay for it. Obama's plans to do so, taxing carried interest as regular income and closing a loophole for some of the self-employed, are unlikely to receive Republican support.
No matter. Conveniently enough, Senator Marco Rubio gave a speech in January proposing a revamp of the program that would -- like the president’s proposal -- expand eligibility and increase benefits for single workers.
Rubio says his plan would not add to the total cost of the EITC, which would require shifting some benefits away from families and finding savings by reducing waste and fraud, which are real problems, costing more than $11 billion in 2012. Michael Strain, the American Enterprise Institute economist whose jobs plan Republican leaders have discussed, has proposed paying for an expansion by limiting the mortgage-interest deduction for high-income earners.
Rubio has yet to detail his plan and how he would pay for it, and the White House never bothered to reach out to him in an effort to find common ground. That was a missed opportunity. Nevertheless, it remains in Republicans' interest to put forward a serious counterproposal.
Tomorrow, Obama will make a campaign-style appearance in Connecticut to kick off his effort to increase the minimum wage. The barnstorming comes a week after House Democrats started a discharge petition drive to force a vote on the issue, a move that has little chance of success. By now it's clear that Democrats intend to make Republican opposition to raising the minimum wage a centerpiece of November's elections. Republican leaders can spend the next eight months stonewalling it -- or they can expand the earned income tax credit and take credit for passing a better alternative.
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