NCPA - National Center for Policy Analysis


April 13, 2006

Welfare benefits, once the domain of the Health and Human Services Department, are now imbedded in the tax code as an IRS giveaway called the earned income tax credit (EITC). More than 20 million tax filer will claim it this tax season, says Investor's Business Daily (IBD).

At the same time Washington limited the number of low-income Americans eligible for cash assistance, it greatly expanded the number who could qualify for the refundable "credit," which was originally intended to subsidize low-income working families. As a result, more Americans now participate in the EITC than any other social welfare program and costs have risen rapidly:

  • Twenty-six percent of the population benefits from EITC, more than benefit from Medicaid (18 percent), food stamps (8 percent), housing assistance (5 percent), Supplemental Security Income (3 percent) and Temporary Assistance for Needy Families, the cash assistance program (2 percent).
  • The number of individuals claiming the credit has surged 170 percent since former President Clinton first expanded it in 1993.
  • The EITC provides recipients up to $4,300 a year in cash, costing taxpayers who don't participate in it $35 billion annually.
  • It's also one of the most abused and defrauded programs. As much as 30 percent -- or well over $10 billion -- in EITC benefits are wrongly claimed each year.

It's plain the program needs to be reined in, says IBD. Unfortunately, it has widespread support in Washington. Annual EITC outlays have soared even under President Bush.

Source: Editorial, "Welfare By Another Name," Investor's Business Daily, April 13, 2006.


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