Paul L. Caron

Tuesday, February 2, 2016

Obama, Ryan See Potential For Tax Policy Compromise

EITC Logo (2014)Wall Street Journal, Obama, Ryan See Potential for a Tax-Policy Compromise:

President Barack Obama and House Speaker Paul Ryan have the rare makings of a tax-policy compromise: Both want to expand a poverty-fighting tool some analysts say could draw millions of Americans into the workforce.

Set to meet formally Tuesday for the first time since Mr. Ryan became speaker, the two hold widely divergent views on taxes, spending and government’s role in American life. But both support a plan to increase the earned income tax credit, or EITC, to include childless workers.

To succeed, the president and the Wisconsin Republican will have to overcome election-year inertia and disputes about how to cover the estimated $65 billion cost over the next decade.

Both men see the potential for a deal. The only time Mr. Obama mentioned Mr. Ryan by name in last month’s State of the Union address was to note their agreement on this idea, which would double the credit to more than $1,000 and make workers as young as 21 eligible. ...

The proposal occupies a policy sweet spot. Democrats see billions of dollars of aid going to low-income households. Republicans see a policy that encourages work rather than dependence. ...

The EITC is structured to encourage work and help parents, acting as a wage subsidy for the lowest-income workers because it increases with income. The credit subsidizes low-income work, creating a combination of wages and tax breaks that can be more attractive than government benefits. Then, as income rises further, the credit phases out. The EITC is refundable, which means taxpayers receive it even if the benefit exceeds their income tax bills. In 2016, in its current form, the entire credit is projected to cost the government $73.3 billion, according to the congressional Joint Committee on Taxation.

To pay for the expansion, Mr. Obama wants to rely on higher taxes on private-equity managers and a change that would make it harder for some professionals to avoid payroll taxes. Mr. Ryan’s plan would eliminate other programs, including ones that provide fresh fruits and vegetables to low-income families and promote U.S. agricultural products overseas.

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Ah, the unearned income tax credit. It is amazing how McGovern's negative income tax has grown to become the basis for creating a permanent underclass. Think about it, minimum wage workers get free tax refunds, free health care, free higher education, and free phones, as long as they vote Democratic. Whut a country!

Posted by: Dale Spradling | Feb 3, 2016 7:35:20 AM