By Dr. Harold Pease
Take my talented friend Ellen who is a single mother with one qualifying child with a very modest adjusted income of $18,957. She paid no federal income tax in 2012, but did receive a “tax refund” of $3,500.
With a college degree in Art she should have full-time employment in some school but in hard times art is often undervalued and among the first cuts. “I know that with my small income, I have to make some hard choices about ‘wants’ and ‘needs,’” she said, “and that often means doing without some things. If I can’t pay for it, then I figure out how to do without it.” She drives a 17-year-old car. Certainly she can use the free money, and is grateful for any help, but she knows that having paid no taxes she should not be getting a “tax refund.”
What is happening to Ellen is happening to hundreds of thousands of other “Ellen’s” throughout the nation and has for most of two generations. It is called Earned Income Credit (EIC) and was a provision of the Tax Reduction Act of 1975, introduced by Republican President Gerald Ford. Initially it gave only $400 per child for low-income taxpayers. The provision was made permanent under President Jimmy Carter in 1979 and has been supported and increased by every president since—Republican or Democrat—regardless of its serious questionable constitutional legitimacy.
Eligibility depends on two variables, one, adjusted gross income, the other number of kids ranging from none to three. Parents without children must be at least 25 years of age and under 65. For taxable year 2012 that income level must be less than 13,980 if single (married filing jointly $19,190) with no children. With one child it can go to $36,920 if single, $42,130 if married filing jointly. With two children it can increase to $41,952 and $47,162. With three children it increases to $45,060 and $50,270 (New American, April 1, 2013 p. 26).
Basically as the IRS describes it, they pay the parent(s) when earned income tax credit “exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit.” Yes, I said this correctly. Amazing!! Only under socialism can this be explained thus.
So, for a typical two child family this taxable year “they can make up to $27,104 and not only owe nothing in taxes, but get a $4,220 earned income credit plus a $1,000 per child additional tax credit refund to them. This effectively gives them an artificial income of $33,324. This is better than a real income increase of that amount because the family’s income is still $27,104 when qualifying for public assistance and when figuring the taxable wages for Social Security and Medicare.” The maximum benefit is scheduled to rise this year “to $6,044, with a partial benefit available for taxpayers with incomes up to $46,227” and $51,567.
This raises some very serious questions legitimately posed by the New American magazine: “If a tax credit ‘payment’ is more than the tax owed, the taxpayer receives a net payment from the government—a refund of money he never paid in.” Moreover, “how can the Earned Income Credit be called a tax refund when it is other people’s money that is refunded?” And, “Why do ‘low to moderate income working individuals and families;’ need a tax credit, when they generally pay no federal income taxes in the first place?” The government, whether lead by Democrats or Republicans, does not want to answer these questions.
As we have reported before, almost 50% of Americans pay no federal income taxes. How can this be fair to the taxpayer who is forced to pay for another family when often he needs his own limited resources for his own kids—especially for those just above the qualifying lines for special government “goodies;” known as the working poor?
Ellen, though grateful for the help, asks the same question. “Why did I get money that I didn’t even pay into the system? My friends who don’t have dependents or other write-offs paid dearly.” She does not want a dole. “I want the government to get out of the way of free enterprise that might offer me better employment opportunities. I don’t want food stamps! I want opportunity! I don’t understand why people can’t see that this system is flawed.” She added, “What happened to the American Dream? President Barack Obama is offering us but low-end concessions. I don’t want to live like this!! I want to work!!” I told her if this column resulted in any job inquiries I would pass them on to her.
Dr. Harold Pease is an expert on the United States Constitution. He has dedicated his career to studying the writings of the Founding Fathers and applying that knowledge to current events. He has taught history and political science from this perspective for over 25 years at Taft College. To read more of his weekly articles, please visit www.LibertyUnderFire.org.