7 million Americans get taxed into poverty every year
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Maybe you think America needs to do drastically more to help the poor. Maybe you don't. But my guess is you will probably agree that, at the very least, the government should not be in the business of taxing workers into poverty.
And yet that's exactly what happens to some 7.5 million childless Americans who are pushed either below or further beneath the poverty line each year thanks to their IRS tabs.
Here's the problem. Federal law is carefully set up to make sure families with children don't end up paying taxes if they're poor or nearly poor.
In large part, this is because they benefit from a relatively generous earned income tax credit—in 2016, it was worth up to $6,269 for a family with three children—that erases their payroll tax liability. But adults without children receive a much smaller version of the EITC—it was worth up to $506 in 2016—meaning their payroll taxes can push them below the poverty threshold (they also get a less helpful standard deduction, which contributes to the problem).
The Center on Budget and Policy Priorities offers this example: A single woman earning poverty-line wages in 2016 would owe $1,170 to the IRS, mostly because of payroll taxes.* The EITC would only offset $184 of that total. In the end, she'd pay $986, putting her below the official poverty mark.
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Both President Obama and House Speaker Paul Ryan have proposed expanding the EITC for childless adults so it will kick in faster and max out at $1,000. (Of course, Obama wants to fund it by eliminating tax giveaways for the wealthy like the carried interest loophole, while Ryan would nix other programs designed to assist the poor, including some that provide families with fresh fruit and vegetables, because he's Paul Ryan.)
But even if their reforms passed, the CPBB finds that some workers would still end up getting bumped into poverty by their tax bill. It's hard to think of a good reason why lawmakers shouldn't go further to eliminate this problem entirely.
I mean, all right, I can think of some counterarguments. Maybe you're like Louisiana's train wreck of a former governor, Bobby Jindal, and are philosophically attached to the idea that everybody, no matter how poor, should contribute something.*
Personally, I'd prefer to alleviate material hardship. Maybe you don't think all of these people are really poor, since some probably receive food stamps or Medicaid, which improve their standard of living.
I'd say that people with a cash income just above or below the poverty line are functionally broke enough that we should feel some queasiness about tapping them as a source of revenue.
Or maybe you think the welfare state should only be geared toward families with children, since kids are fundamentally helpless. In that case, consider that the EITC has been a smashing success at getting the poor to work more by making it more financially rewarding, and that helping low-income young adults get their footing in the job market early could set them up for financial stability later on, when they're parents.
And in the end, we're talking about the simplest possible way for the government to alleviate need in this country: All it has to do is refrain from collecting money from people who can't afford it. As Chuck Marr, CBPP's director of federal tax policy, told me, “If you want to reduce poverty, this is pretty easy.” No kidding.
*Correction, Sept. 8, 2016: This post originally misidentified the Center on Budget and Policy Priorities as the Center on Budget Policy and Priorities. It also misspelled Louisiana.