The Corner

Economy & Business

The Inexpensive Earned-Income Tax Credit

Last week, NR published “The Case for the Wage Subsidy,” an excerpt from Oren Cass’s excellent new book The Once and Future Worker, in which he calls for a souped-up alternative to the earned-income tax credit that has much to recommend it. But I suspect Oren would agree that short of his more ambitious proposal, there is much to be said for hiking the EITC itself, especially for childless workers. There is widespread agreement that an EITC hike for childless workers would stimulate labor-force participation and reduce poverty. The downside, of course, is that it would cost money. Over at The Atlantic, I recently offered a potential pay-for — a modest tax hike on upper-middle-income households. While I realize that this isn’t exactly a wildly popular idea, I see it as a “put up or shut up” proposition for the large and growing number of well-off voters who favor more redistributionist policies. Will you still favor them if you have to pay for them? As it turns out, though, there is reason to believe that an EITC hike might actually pay for itself, or rather it might come pretty close.

Recently, Jacob Bastian and Maggie Jones released a working paper that makes use of data from the Internal Revenue Service to assess behavioral responses to the EITC. Because the EITC encourages people to join the labor force and to increase their earned income, it tends to reduce reliance on other forms of public assistance and, over time, to increase taxes paid. Both of these effects tend to reduce the net cost of the EITC. Drawing on data from EITC expansions over the past three decades, Bastian and Jones find that “the EITC has a self-financing rate of 87 percent, so that the EITC’s true cost is only 13 percent of the sticker price,” which would make it “one of the least expensive anti-poverty programs in the U.S., costing taxpayers about half as much as the school lunch and breakfast programs.” Keep in mind that this is still a working paper, and there may yet be kinks to iron out. Further, it is not at all clear that future expansions would yield the same results. So one should take these findings with a grain of salt. Still, they are awfully encouraging to those of us who see wage subsidies as a valuable tool.

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

Most Popular

Culture

On the Letter

I thought it right to congratulate John MacArthur and Harper’s magazine on putting together an open letter in defense of intellectual liberty — including the liberty to make mistakes -- as a necessary component of social justice. And further congrats on assembling its broad church of signatories. MacArthur ... Read More
Culture

On the Letter

I thought it right to congratulate John MacArthur and Harper’s magazine on putting together an open letter in defense of intellectual liberty — including the liberty to make mistakes -- as a necessary component of social justice. And further congrats on assembling its broad church of signatories. MacArthur ... Read More
Media

The Media’s War on Words

I recently ran across a piece in the Philadelphia Inquirer that lays out four racist words and phrases that should be banished from the English language. It begins like this: Editor’s note: Please be aware offensive terms are repeated here solely for the purpose of identifying and analyzing them honestly. ... Read More
Media

The Media’s War on Words

I recently ran across a piece in the Philadelphia Inquirer that lays out four racist words and phrases that should be banished from the English language. It begins like this: Editor’s note: Please be aware offensive terms are repeated here solely for the purpose of identifying and analyzing them honestly. ... Read More

Year Zero

Every cultural revolution starts at year zero, whether explicitly or implicitly. The French Revolution recalibrated the calendar to begin anew, and the genocidal Pol Pot declared his own Cambodian revolutionary ascension as the beginning of time. Somewhere after May 25, 2020, the death of George Floyd, while ... Read More

Year Zero

Every cultural revolution starts at year zero, whether explicitly or implicitly. The French Revolution recalibrated the calendar to begin anew, and the genocidal Pol Pot declared his own Cambodian revolutionary ascension as the beginning of time. Somewhere after May 25, 2020, the death of George Floyd, while ... Read More
U.S.

COVID’s Comeback

We’re living in Groundhog Day. For the second time this year, COVID-19 is sweeping the country and we don’t have any great options for dealing with it. We didn’t squander the past four months, exactly, but we demonstrably failed to get to a place where we can enjoy an open society without the virus taking ... Read More
U.S.

COVID’s Comeback

We’re living in Groundhog Day. For the second time this year, COVID-19 is sweeping the country and we don’t have any great options for dealing with it. We didn’t squander the past four months, exactly, but we demonstrably failed to get to a place where we can enjoy an open society without the virus taking ... Read More