Understanding the History of the EITC Can Help Us Protect It

Everybody has an opinion about taxes. But there are some tax credits that are particularly successful at doing their job and deserve support and attention. One of these is the Earned Income Tax Credit or EITC.

The EITC was created as part of the Tax Reduction Act of 1975. It is important to understand the original purpose of the EITC; it was created with the intention “to offset the Social Security taxes of low-income workers with children and to provide those taxpayers with an increased incentive to work.” After minor legislative changes, it was expanded and refined during the Tax Reform Act of 1986, becoming similar to the program we have today. Since then, there have been various expansions. It has also gained an additional and more significant responsibility as an anti-poverty program. In fact, the EITC was a by-product of welfare reform discussions during the 1970s.

The Tax Reform Act of 1986 is often seen as a major tax cut, but what goes unseen is the effort by then-President Ronald Reagan to ensure that people in poverty would not pay federal income taxes. The belief was that those in poverty need to be spending money on their families, food, housing, and other necessities, not federal income taxes. In his said, “the Earned Income Tax Credit is the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”

As a result of this law, almost 6 million low-income people were helped.

Unfortunately, times change. Now the EITC is demonized with calls in Congress to “reform” it, i.e. cut it. What is disturbing for me is that there has been a shift away from the belief that people experiencing poverty are responsible and respectable Americans who will work to lift themselves out of poverty if we set up a system that works for them.

Urge your members of Congress to protect and strengthen tax credits for working families such as the EITC using our

[1] $25,566 in 2013 dollars.