They already do. The EITC (Earned Income Tax Credit) applies primarily to filers who are head of household -- which, by definition, requires having at least 1 dependent. Childless people are filing single.
No; I am not assuming that. The standard deduction does cover a lot of people; but a lot of the people that it covers end up filling out other forms as part of their returns for tax credits.
For example, the Earned Income Tax Credit is a means-tested benefit program that's delivered through the tax system. This is not a niche program - 25 million families benefit from it.
It requires filers to identify how many qualifying children they have, which in turns depends on things like the educational status (is this child in school, college, are they a full-time student) and residency (child must generally live with you, but with exceptions for overseas military service, etc).
In cases where multiple filers can claim a qualifying child (e.g. cohabiting single filers), you're required to make an election as to which return will claim the qualifying child.
The EITC also encourages reporting of informal income (because it's only available to people who earned an income) which might not be on a W-2 / 1099, e.g. baby sitting, to qualify.
None of that stuff is known to the IRS from W-2s, 1099s etc. and they are dependent on the filer to provide it every year, especially as circumstances change; and filers are strongly incentivized to provide it as the credit is refundable.
Sort of. Except EITC is anemic and a work incentive with a focus on children rather than a negative income tax.
Someone supporting a kid gets a much larger max benefit than someone earning the max benefit with no children ($3,400 vs $510) and the benefit tapers away for low incomes.
The earned income tax credit is essentially a tax credit for low income parents. It isn't billed that way and it isn't technically limited to them, but if you look at the formula, for any tax filer with no children the maximum credit is $506. That's about twenty five cents an hour for a 2000 hour work year, 12.5 for a 4000 hour work year (i.e. for a two earner household). This peak credit is reached at $6,610-$8,270 for a single filer and $6,610-$13,820 for a married couple. It is phased out to zero by $14,880 and $20,430 respectively.
Now maybe when you say we need to make the EITC much more generous you include as part of that fundamentally changing the nature of the program. But it is worth noting what it is and isn't today. And that's a refundable child tax credit, not a general negative income tax program.
That's exactly it. The earned income tax credit (EITC) is a direct transfer of money from the government to tax payers that only low income households are eligible for.
Most of the low income audits are related to the EITC, because people tend to fudge checking a box to get more money.
EITC is not a some kind of a deduction though. EITC is a significant source of government welfare as it pays more than the taxes you paid at certain levels of income. And the reason it's a part of tax code instead of a direct handout is that illegal aliens would not be eligible otherwise, I suspect.
Personally I could get behind the "lower federal minimum wages regulations" if it were met with a "but increase a EITC to help tweak the income of those who need help".
I've heard anecdotally from people working in non-profit agencies assisting with tax preparation that there was extensive lobbying to prevent changes that would make it easier to file for the earned income tax credit.
The average return for those applicable is ~$2,500, which is a huge amount for people who qualify, lost so Intuit and H&R block can better market their product.
A negative income tax is far more complex, here is an example of contemporary system.
https://en.wikipedia.org/wiki/Earned_income_tax_credit
``Millions of American families who are eligible for the EITC do not receive it, essentially leaving billions of dollars unclaimed. The IRS estimates that about 20 percent of eligible taxpayers do not claim $7.3 billion of Earned Income Tax Credit (EITC) each tax year.[43]``
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