First of all, I want to preface this article in saying that I don't think anyone who takes the Earned Income Credit has done anything wrong here, though there is a situation I know of in which people have done wrong and I will spell that out at the end.
My wife was doing taxes for a friend one evening this past week
and for discussion purposes I will call her Sherry. Sherry is a single mother of three, and sheworks 32 hours a week. She made a total of $25,000 in 2010. She paid out to SSI, Medicare, Michigan State Tax, and Federal taxes a total of approximately $1200 over the course of 2010. Now, before anyone assumes, I do understand that $25,000 is not a lot to raise three kids with. She does not get child support, but she does get food stamp assistance. When my wife went through the online software and entered everything in, it came back that Sherry was going to get over $8,000 from the Federal government due to credits, and nearly $2,000 from the State government. When we subtract the amount of taxes she paid in to all sources in 2010 from the amount of money the government(State and Federal) will be sending her, she comes out of this with a check for $7,790.94 above and beyond the taxes she paid in during 2010.
Now, this check comes from the government, that is great! All those credits make for quite a nice sum. If you cannot see any problem with this, what is wrong with you? What do you know that I don't? I have been trying to wrap my head around how it is right for months now, and no one can seem to convince me otherwise. This is stealing tax money paid in by other workers that work harder and put more of their time into their work to give it those that do not work as hard just for working and making less money than those that actually pay taxes. Take my father for example. He works 50 to 60 hour weeks, every week. He owns his own business and is an owner/operator of a semi-truck. He grosses approximately 115,000 per year. He paid 16,100 in taxes during 2010, not including fuel tax, license plate, heavy use vehicle tax, etc.
How is this right? Someone works more hours in a job that
takes more initiative and then is punished by a high tax rate. Those
same tax dollars are used to pay Sherry, who worked 32 hours per week in 2010 in a much less demanding job and is getting a $7,790.94 award just for working and having children(Earned Income and Child Tax credits).
I've truly been trying to wrap my head around why or how it can
possibly be RIGHT to give people a payday at tax time(ABOVE and beyond
what they may have paid in over the course of the year). My answer
is that even though it is the way it is, it is NOT right and I would
argue no longer relevant to the original purpose of the credit.
I was speaking to my wife about my thoughts on this subject and
I stated the following quote to her, "From each according to their ability, to each according to their need". I asked her if she thought
that summed up the situation I presented above and she agreed that it did. I told her that the person that said this was none other than Karl Marx - the father of Communism.
According to the Indicators Northwest website, "The Earned
Income Credit was put in place by Congress in 1975 to offset the burden
of social security taxes and to provide an incentive to work."
catorID=100030) Today, this credit does not offset the burden of
social security taxes, it reimburses them and then some. Today, there
is no need to provide an incentive to work. Money to live on should
be the incentive to work. There are hundreds if not thousands of
people waiting to fill a job if someone decides they don't want to
work. It is time for tax reform, and the Earned Income Credit should
be the first to go.
I know people who take advantage of the Earned Income credit as
a married couple as well. Together, they make too much per year to
get the earned income credit. How do they get around the rules? By
filing married filing separately. One spouse may have to pay in more
taxes, however it is offset by the HUGE payday provided by getting the
Earned Income Credit on the spouse that files as Head of Household.
Is this legal? No. Is it done regularly? Yes. The enforcement
alone required to eliminate this sort of fraud is very costly. I say
eliminate the fraud altogether by eliminating the Earned Income Tax
Credit. I say stop taxing those that make more money(not necessarily
RICH) and giving it to the poor. I say bring some reason to the issue
of tax reform and do what makes sense. Eliminate unneccessary and
outdated credits that are bleeding taxpayers at a time when everyone is
already bruised and bleeding in a weak economy.
As an alternative, we could always allow only those that pay taxes to vote...but I will save that for another article.