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Support earned income tax credit

BY DI EDITORIAL BOARD | NOVEMBER 07, 2014 5:00 AM

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After the election, local and federal officials would like to re-evaluate tax-credit systems. Who should get them, how much they should get, and if they are actually effective are questions that everyone seems to want an answer on.

In Iowa, the Iowa Policy Project is reviewing certain programs: the Iowa Childcare Assistance Program, the Earned Income Tax Credit, and the Child and Dependent Credit.

The Iowa Childcare Assistance Program works to make childcare affordable for working parents. This program is seen as the most dire need, because one in six households in Iowa do not make family-supporting wages.

Childcare costs are continuing to increase much faster than household income, forcing some to stay at home and further burdening the household’s financial status. Sufficient childcare allows more parents to work, increasing household income while generating GDP for Iowa and the United States.

Further, children with sufficient early childcare have been found to enter kindergarten ahead of their peers who didn’t attend some sort of similar program.

The Earned Income Tax Credit is widely considered one of the most effective poverty-fighting tools in existence. It is rather clever and often is one of the few things both conservatives and liberals can agree upon.

The idea is simple. In 2013, working families with children earning $37,870-$51,567 received the refundable credit. Workers without children who earned under $14,340 ($19,680 for married couples) also received the credit. Unlike some forms of assistance, the tax credit provides an incentive to work. People who work full-time shouldn’t go to bed hungry — at least that is the idea behind the tax credits. People put these credits into their residences, their savings, or investments in education and finances. 

Thousands of families across the nation benefit from the program. Studies conducted by economists at the Tax Foundation have found that this form of assistance is effective and may even lead to healthier birth weights. 

The tax credit affects many aspects of life for the recipients. It also incentivizes growing wealth by offering larger tax breaks as someone makes more money. This may seem counterintuitive at first, but in practice, this greatly motivates working-class people to squeeze every ounce of productivity they can.

The major problem with the credits is lack of awareness and scope. Rep. Paul Ryan, R-Wis., and President Obama are working on a plan to expand the availability of credits and to better inform those who are eligible but unaware, according to the Brookings Institute.

Child and Dependent Credits are tax breaks designed to give aid to families with young children, children in college, and impaired adult dependents. Without these credits being reinstated or expanded, families of UI students will end the year less wealthy than they could have been. With prices rising and stagnant wages, these tax credits seem to be the only short-term solution.

The Daily Iowan Editorial Board believes increasing tax credits for families and the working poor should have the full support of Iowans. That being said, tax credits do not come without clauses. At the federal level, tax credits for the working class will only be passed by compromise, which will include tax breaks for the wealthiest Americans. Many may hate taxes, but they are necessary, and when the opportunity to reduce the burden on working families is available, we should take it.


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