Coffman Introduces EARN IT Act

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Washington, July 25, 2017 | comments

Bill Garners Bipartisan Support

Washington, D.C.—Today, U.S. Representative Mike Coffman (R-CO) introduced H.R. 3379, the Enhancing Advancement, Reducing Noncompliance, and Improving Trust Act, or EARN IT Act. This legislation is cosponsored by Representatives David Cicilline (D-RI), John Faso (R-NY), and Mark Takano (D-CA).

The Earned Income Tax Credit (EITC) rewards work for low-income workers and families by adding to their income through a refundable tax credit (RTC). A refundable tax credit is treated as a transfer payment in that the amount available for the EITC is subtracted from a worker’s tax liability so that the worker receives the difference between the two. This creates a graduated phase out because if the worker’s income rises so does the tax liability causing the EITC to decrease accordingly. The Tax Policy Center of the Brookings Institution notes that, “The EITC is the single most effective antipoverty program targeted at working-age households.” Initially the tax credit phases in, meaning workers get a larger credit the more they earn; then it gradually phases out, meaning the credit shrinks as wages grow to the point that workers no longer need it.

"Having grown up in a working class family, I fully understand the importance and the value of work over welfare. This is why increasing incentives to reward work is so important and this legislation does exactly that," said Coffman.

Under current law, the EITC benefits mostly low to moderate adult workers with children over the age of 25 but gives very little help to low income single adults.  For example, a childless worker can only participate in the program with an adjusted gross income below $14,880 and could receive $506 while a worker with three or more children, with an adjusted gross income as high as $47,955 could receive $6,269.

The EARN IT Act expands the credit for childless workers, especially young, single people at the beginning of their careers. Specifically, the bill would:

  • Raise the maximum credit for childless adults;
  • Raise the phase-in and phase-out rates so the credit grows more quickly, then shrinks more quickly as income nears the maximum;
  • Phase the credit in and out over a greater range of incomes; and,
  • Reduce the minimum age to claim the credit from 25 to 21.

The bill is a bipartisan effort. In 2013, then-Budget Committee Chairman Paul Ryan proposed expanding the EITC to childless adults. President Obama has also put forward a similar proposal in his annual budget. Increasing the EITC, unlike increases in the minimum wage, does not discourage employers from hiring low skilled entry-level workers by raising their cost of doing business.

"It's harder than ever for working people to get ahead today," said Cicilline. "But the EARN IT Act is a commonsense way to make life easier for workers across America. I’m proud to be working with members of both parties to get this bill passed into law."

Representative Faso added, "The EARN IT Act is important legislation that expands on the Earned Income Tax Credit (EITC) for childless workers. Many young, single people struggle to make ends meet at the beginning of their careers, and under current law this group is left behind. The EARN IT Act corrects this inequity and contains much-needed anti-fraud provisions for the EITC program.  I am proud to cosponsor this legislation."

In 2014, the nonpartisan Congressional Research Office (CBO) did a study on what the impact would be of raising the federal minimum wage to $10.10 an hour and their study concluded that the increase in the minimum wage would result in lifting 900,000 workers out of poverty but at a cost to the economy of 500,000 jobs.

Increasing the EITC will have an additional cost to the U.S. Treasury. To offset this, the EARN IT proposal also includes cost savings generated from tightening up the enforcement and preventing fraud to make sure that only those who meet the eligibility requirements for the EITC are drawing it. According to the Joint Committee on Taxation, doing so would result in a net savings of $1.4 billion over the 10-year budget window which is more than enough to pay for increasing the EITC for low wage workers who need additional help.

"I’m pleased to have the support of both Republicans and Democrats on this important legislation.  Standing up for low wage workers is not a partisan issue but it’s an issue we can all support," said Coffman.

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