With the possible exception of President Dwight D. Eisenhower’s warning against the rise of the “military-industrial complex,” the Earned Income Tax Credit is the best conservative idea introduced during Chatterbox’s lifetime. It was invented in 1975 by the recently deceased Sen. Russell Long, chairman of the Senate Finance Committee and the polar opposite, politically, of his populist, Standard Oil-baiting father, Huey Long. (You “have to have capital if you’re going to have capitalism,” he would say to justify shoveling tax breaks to big business.) Russell Long proposed the EITC as a prudent incentive to keep poor people off welfare. (For more details on how the EITC was born, see “Present at the Creation” by Jodie T. Allen.) The program moseyed along at a relatively low spending level during the presidency of Democrat Jimmy Carter. But when Ronald Reagan became president, he started steadily expanding it. For Reagan, it provided a useful counterexample to welfare programs that bred laziness and dependency. Rather than pay people not to work, the EITC paid people to work.
Bill Clinton, who had a genius for co-opting conservative ideas, doubled the size of the tax credit awarded to EITC recipients, and he also expanded eligibility. (Some of this was the result of a gradual expansion phased in by the first Bush administration. Click here for inflation-adjusted numbers.) By the end of Clinton’s two terms, according to Leonard Burman (a deputy assistant treasury secretary in those years and now a senior fellow at the nonprofit Urban Institute), the EITC was being used by more eligible low-income families than either the Food Stamp program or Temporary Assistance to Needy Families, the successor to the program eliminated by welfare reform, Aid to Families With Dependent Children. Participation in the Food Stamp and TANF programs, which did not reward work, was falling. Participation in the EITC program, which did reward work, was increasing. If you took at all seriously the notion that welfare bred (or at least enabled) dependency, you had to think this was a good trend.
If, on the other hand, your dislike of welfare dependency was merely a cover for disliking poor people, conservatism’s triumph in selling the EITC to liberals created the need for a new paradigm. Thus was born the “tax the poor” movement, which calls for raising taxes on the poor and middle class so that they don’t blossom into a powerful voting bloc indifferent to the cost of big government. (According to the rosiest scenario, raising taxes on the poor will turn them Republican, though if this led to excessive fraternization between poor Republicans and rich Republicans a third paradigm would surely be called for.)
The EITC is an important theater of operations in the war on the working poor, because if you’re going to start taking money away from poor people, it’s prudent to start merely by giving them less. The Bush administration increased eligibility in 2001, but in the last two years it has done nothing to expand the EITC while becoming steadily more interested in policing fraudulent claims. Nobody likes tax fraud, of course, but EITC fraud causes the Bushies much greater offense than any other kind. EITC claims are twice as likely to get audited as other individual tax returns, even though in dollar terms EITC cheating accounts for a mere 3 percent of all IRS cheating. The IRS is also starting to impose elaborate procedural changes that will require recipients to submit documents and even affidavits before they can collect any cash. (For a critique by Robert Greenstein of the nonprofit Center on Budget and Policy Priorities, click here.)
This is the setting in which the June 3 Wall Street Journal carries its third editorial since November advocating higher taxes on the poor. (Click here for the first and here for the second.) The editorial attacks the whole idea of refundable tax credits as a typically dizzy bit of Washington tomfoolery:
Most Americans probably don’t realize that it is possible to cut taxes beyond zero. But then they don’t live in Washington, where politicians regularly demand that tax credits be made “refundable,” which means that the government writes a check to people whose income after deductions is too low to owe any taxes. In more honest precincts, this might even be called “welfare.”
But in the case of the EITC, an even more honest description would be “workfare,” another slogan championed by Ronald Reagan that, for conservatives, has outlived its usefulness.
Meme Watch archive:
June 2, 2003: “A Unified Theory of Bush Lies?”
Jan. 20, 2003: “Return of the Lucky Duckies”
Jan. 16, 2003: “Tony Snow Says Tax the Poor!”
Jan. 14, 2003: “A Payroll Tax Rise?”
Jan. 2, 2003: “Bushies Get Cold Feet”
Dec. 16, 2002: “Bushies Take the Bait”
Nov. 27, 2002: “Introducing the Meme Watch”