Your tax dollars!
Most people don’t realize that there are people who are not making enough money to owe taxes but are filing tax returns and getting (LOL!) money back —-I’m laughing because they aren’t getting money back that they put in, just getting other peoples’ tax money back.
Edwin Rubenstein has a good report (published at the Social Contract) on this program that is a more significant drain on our federal budget than some other forms of ‘welfare.’ (But, not as fast-growing as the fraud-ridden food stamp program!) Read all about it here, hat tip Richard at Blue Ridge Forum.
On tax day 2009 we released a study of the Earned Income Tax Credit. At the time we noted that the credit had quietly become the largest cash transfer program for low-income families in the United States – dwarfing better known programs such as TANF (cash welfare.) Since then Federal spending has expanded far more rapidly than anyone had anticipated while tax revenues have shrunk. In FY2008 the U.S. budget deficit was $0.5 trillion; this year (FY2011) it is projected to be $1.6 trillion.
Every spending program, every revenue source is on the table – or so we are told. Reductions in Medicare, Medicaid, and other “untouchable” social programs have been proposed. Yet the EITC is under the radar in this debate. Neither party has shown any interest in cutting the tax credit. The credit is not subject to the Congressional budget authorization process.
One reason for its relative anonymity: EITC is part of the income tax code. (That’s why we chose April 15th to release our study.) The tax code is vast – it contains many different deductions, allowances and credits – of which the EITC is one of the most generous – and important.
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The credit is expected to cost taxpayers a record $62.5 billion in 2011, up 4.5% from 2010. (This amount reflects both the reduction in tax payments plus the EITC refunds many recipients receive over and above their tax payments.) By comparison outlays of the notoriously hard to control Medicaid program are expected to rise by a mere 1.2%: see the chart!
Readers: we have a category entitled, where to find information, and this will be archived there. You might want to visit that category from time to time.