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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, January 20, 2005

Zelenak on Redesigning the EITC as a Minimum Wage Adjustment

ZelenaklLawrence Zelenak (Duke) has published Redesigning the Earned Income Tax Credit as a Family-Size Adjustment to the Minimum Wage, 57 Tax L. Rev. 301 (2004). Here is the Conclusion: 

Congress has never offered a coherent account of the purpose (or purposes) of the EITC, and the structure of current law does not suggest any well-defined purpose. The somewhat incoherent nature of current law might be the result of a compromise between conflicting visions of the credit's purpose, rather than the lack of any clear vision, but it is difficult or impossible to find attractive accounts of the purpose of the credit even in the academic literature.

This Article has argued that the EITC can and should be redesigned to serve as an adjustment to the minimum wage based on family size, to lift all families headed by full-time workers out of poverty. Although this view of the EITC would inform a redesign of the credit, it would certainly not dictate every element of credit design. People might agree on this basic goal for the credit and still disagree on many structural details, such as: (1) whether the maximum amount of the credit should be tied to the official poverty guidelines, (2) whether there should be some limit on the number of credit-generating children for any one household, (3) how rapidly the credit should be phased in and phased down, (4) how far the credit should be phased down (that is, what are appropriate differences in tax liability based on family size, for middle and upper income taxpayers), (5) whether the credit design should be based on the assumption that the de facto minimum wage for working parents exceeds the official minimum wage, (6) whether there should be special credit rules for parents of young children, based on the view that such parents should not be employed full-time, (7) whether the credit should be designed to cover the subsistence needs of a worker's homemaking spouse, as well as those of the worker's children; and (8) whether the minimum wage-adjusting aspect of the credit should be combined with or separated from any payroll tax relief for low wage workers. Despite these numerous and important open questions, viewing the credit as a minimum wage adjustment could be the first step in the development of a more rational and more effective anti-poverty program for working families.

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