American President Gerald Ford signed the Consumer Goods Pricing Act of 1975 while a group of … [+]
It has already happened.
Or at least, depending on your point of view.
Here is the shovel:
The income tax credit is a federal benefit paid to low-income workers, with benefits varying based on family size. In contrast to SNAP / Food stamps and similar benefits, it is intended as a work incentive in that benefits are only paid to the working poor, as a percentage of income up to an upper limit. For example, a poor taxpayer / couple with two children will receive a credit of 40% of their income up to a maximum of $ 5,980, which will then gradually expire until the credit is removed entirely when the income is $ 42,000. Benefits are primarily intended for families with children, but the very poor childless taxpayers receive up to $ 543 or up to $ 1,502 temporarily under the American Rescue Plan Act. This tax credit is fully refundable, meaning taxpayers who owe no income tax or who owe less than the value of the EITC will receive the value of the credit or the balance. (You can find some helpful links at the Tax Policy Center, which has a nice graphic, at the National Conference of State Legislatures, which also has information on state versions of the benefit, and of course at the IRS itself.)
And as luck would have it, the EITC is approaching its 50th birthday, having first appeared in 1975, as a temporary benefit, as part of a tax cut package designed to boost the economy along with other loans, discounts, and exemptions. It was then extended several times and made permanent in 1978. (See “The Earned Income Tax Credit (EITC): A Brief Legislative History,” produced by the Congressional Research Service.)
What was the purpose of the loan? In some ways, as it is now, it was only intended to help poor families. But if we formulate the question a little differently and ask what the reason for the recognition was, we have our answer directly from the law authors themselves:
“The credit is set at 10%. [of the first $4,000 in income] to roughly match the added burden of employee and employer social security contributions. ”(Wages of $ 4,000 in 1975 are roughly $ 26,000 today, adjusting for wage increases over time and FICA -The tax rate at that time was 5.85% for both employer and employee.)
Of course, this has long been forgotten, even if the EITC itself has gained in value over the years and services for childless people have been added.
And in the meantime, politicians and policy experts are debating whether social security is a regressive tax because the wage cap limits the tax paid by the highest earners. Here is the Center for Budget and Policy Priorities:
“Social security payroll tax is regressive because of its flat rate and cap, so that low- and middle-income taxpayers, on average, pay more of their income in wage tax than high-income people.”
So how should this story affect how we feel about our current taxes and benefits for the poor? Should the fact that the EITC loan was originally intended to offset the FICA / Social Security tax for the poor have any greater bearing on future discussions about social security benefits and taxes, or is this just a historical curiosity? Was the offsetting of social security taxes “real” at all, since it only ever served as a reason for the offsetting and was not directly written into the tax formula?
This may seem like a historical curiosity with no future relevance, but given reports that the Build Back Better Act in its current form is dead and with likely debates over provisions like the Child Tax Credit, the expanded EITC and, ultimately, funding for the Social Security itself, we would do well to keep some of this history in mind.
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