Sen. Patty Murray (D-WA), chairman of the Senate Budget Committee, has introduced new legislation to expand the earned-income tax credit. Sahil Kapur of Talking Points Memo reports that Murray’s “21st Century Worker Tax Cut” expands the program’s income eligibility range for childless workers, lowers the eligibility age to 21 from 25, and makes the EITC more generous for dual-earner households. The proposal closely mirrors a recent EITC proposal from the Obama administration, yet the president’s proposal did not include Murray’s dual-earner provision, which helps mitigate the marriage penalty.
Moreover, Rubio calls for a federal wage enhancement designed to reduce the payroll tax burden. This helps address one of the central concerns conservatives have raised about the EITC, which is the danger of improper payments. Murray addresses the improper payment problem by doubling the penalty for tax return preparers. One could argue, however, that the underlying problem is that the complexity of the EITC effectively requires low-income workers to employ tax return preparers while a federal wage enhancement that makes use of the payroll tax system would not.
The pay-fors in Murray’s proposal focus on the corporate tax code: the first changes the tax treatment of stock options; the second changes the status of the foreign income of U.S.-based multinational business enterprises. It is not clear that either tax tweak should be outside of the context of a larger restructuring of the corporate tax.