NCPA - National Center for Policy Analysis

Republicans and the Earned Income Tax Credit

June 16, 2003

Republicans are having a hard time getting traction on the idea that it is wrong to increase refundable child tax credits to families with no income tax liability. It's not a question of being stingy; many are genuinely concerned about the growth of a nontaxpaying class that potentially can vote subsidies for itself under the guise of tax reduction. In practice, however, this is less of a problem than it appears, says Bruce Bartlett.

In truth, Republicans invented the first refundable tax credit, the Earned Income Tax Credit (EITC), back in the 1970s. And it was Republicans who invented the child credit in the 1990s. As a result of the EITC, the child credit and other tax cuts, the percentage of those with no income tax liability has risen to 30 percent of all tax filers, according to the Tax Foundation.

  • The combination of EITC and the child credit offsets 100 percent of the income tax liability for almost all families with incomes below $30,000.
  • And because of refundability, 100 percent of the payroll tax is also offset for those with incomes below $20,000.
  • Those with earnings below $10,000 pay no income taxes and get a check from the government for 2.6 times their payroll tax liability.

Some now worry that having so many citizens free of taxation is a threat to democracy. In principle, there is nothing to stop them from voting themselves larger and larger benefits at the expense of the taxpaying class, according to Bartlett.

Source: Bruce Bartlett, "Republicans and the Earned Income Tax Credit," National Center for Policy Analysis, June 16, 2003 and Investor's Business Daily.


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