Monday, February 8, 2016

Earned Income Credit

For the purposes of this blog post, I will assume that everyone knows what Earned Income Credit is. If you don't, go look it up and come back.

Earned income credit is the biggest money waste of taxpayer's dollars ever.  I see people blowing their giant refund checks of $5000+ in Walmart on big screen TV's, game systems, cell phones and other expensive electronics.  Some people might save theirs or pay bills but a majority blow their refund in a matter of days.  One only has to go into Walmart and set foot in the electronics section to see poor people with a boatload of kids buying willy nilly while their kids stand there without hats, boots, gloves and haven't had a haircut for who knows how long.

Here are ways that I think the money could be much better spent than giving it back to poor people to blow:

Expand eligibility for WIC--currently the cutoff age is 5 for children, expand it to age 12 and include fresh fruits and vegetables

Expand daycare assistance so those that want to work can do so

Expand preschool programs on a federal level.  Some states have them but not all and it's proven that these programs targeted to the poor do set up children for later academic success

Provide training and/or education for single moms--they do this in prison, why not elsewhere?  Train women to cut hair, become a machinist, cook, any skill that makes more money

It really irks me to see my tax dollars get blown by somebody who received a refund because of the ridiculous Earned Income Credit.  If they use it to better their life, then so be it but I don't think most do.  Do you have another good way federal dollars could be spent to actually help the poor?

17 comments:

  1. That credit irks me to no end. Why should poor people be rewarded because they had kids? and since it's a credit and not tax deduction people get money back they didn't even pay in. So basically you take my tax dollars and hand it over to a person who then goes and blows it. So ridiculous!

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    1. I think that since it is largely driven by having dependents, the money should go back in some form to help the dependents.

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  2. I think that if they receive an EIC, but have kids getting free lunch, the district ought to be able to garner the EIC for the cost of the meals for the previous year. Of course, when I say that, people think I want hungry kids. I don't. I want responsible citizens

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    1. *garnish* Sorry. My device did that.

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    2. I agree with you in theory but I think that some kids would suffer. The kids in my school district really need the free lunches and breakfasts because they aren't getting the nutrition they need at home.

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    3. They would still get the food, but the IRS would take the amount the meal cost that year from thrir eic and turn it over to the district.

      And, if you can afford cable, multiple t.v.sets, gaming systems, multiple cell phones, and DC shoes for your kids, you can afford to pack them a lunch.

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    4. Really, then what would pay for their clothes and shoes and things that aren't food? You're messed up.

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    5. Happy Valentine's C I mean Rosalind. How's Walmart treating you? What will you be spending your earned income credit on? A new laptop? A gym membership?

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  3. Not everyone blows their money! The program encourages work which IMO is a good thing and it also keeps people above the poverty line. You have to remember that many people don't have the skills/ability to make more money and still work very hard at what they do. I have never been broke- it must be awful, but I was well educated and have always had the potential to earn a good salary.

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    1. You're right. Not EVERYONE blows their money. It does encourage people to work which is great. It also encourages reproduction for tax purposes which I have an issue with. I do know that some people don't have the skills to make more money which is why one of my suggestions was to train women to make more money. There are many factories in my area who will hire anybody willing to work and within 3 years you will be making around $30,000+ but those are hard jobs. It requires people to get dirty, sweaty, and work hard for the money. Usually within 5+ years, one can be making pretty good money.

      I've been super poor. Once we went an entire winter and used the outhouse because we didn't have the money nor resources to fix the one toilet we had. I'm 36 BTW. It sucked. When I was old enough, I decided I wanted to go to college. I paid for college on my own without help from anybody. I was able to do that because Americans have plenty of opportunity. I now make six figures and I credit it to hard work and American opportunity.

      I would also question on whether earned income credit really puts people above the poverty line. If the money is gone in two weeks or less, can you really include that in annual income because its not around to help pay rent in the other 11 months. I think this is what smart politicians tell people to feel better about the program they put in place.

      I still stand by my ideas that the money could be so much better spent in a number of other ways rather than giving it to poor people in an annual lump sum.

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  4. The issue is probably that it comes as a single large payment, so people treat it as a bonus. If instead it was doled out in smaller amounts over the year, that'd probably encourage people to use it more for every day expenses rather than on large purchases.
    In the end though all money is fungible so even if they used it responsibly, if they buy luxuries out of their regular income, there really is no difference accounting wise. Though if you make the assumption that they wanted to buy something expensive like a cell phone anyways, it probably ends up saving them money to be able to buy it outright rather than buy it on some installment plan or take out debt to buy it (as many even in the middle class do since our culture teaches that this is perfectly normal).

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    1. Also some further thoughts:

      I think opinions on how many use it 'frivolously' versus 'responsibly' might be due to selection bias. After all we only see the ones who do use it up to buy things at Walmart (and even then that's assuming the windfall is from the EIC not any other tax benefits or even just them getting a refund from legitimate over-payment). We'll never see the people who do use it responsibly. Given that about 30 million people received it, I'd probably think that unless a Walmart was stuffed with 10k+ people that means the majority of them are spending it elsewhere in places we'll never see, like to a landlord, or overdue bills, or even just saving it for later.


      Well so now your got me interested and I did a bit of reading, and found an interesting page with real statistics, rather than just gut feelings:
      http://www.cbpp.org/research/federal-tax/eitc-and-child-tax-credit-promote-work-reduce-poverty-and-support-childrens

      I'm sure someone'll claim it's biased or something, but at least it's using real numbers (which we know is paramount in the world of personal finance). It does tend to support the idea that the credit does help people go out and find work and even take time to get educated and better jobs. One of the interesting stats is that the majority of families only claimed it for a few years, so to me that paints a very different picture. Typically we assume that people 'live off welfare' and are continuously collecting benefits without trying to better themselves. But this seems to suggest that many in fact do want to earn more and as importantly many do succeed in it.

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  5. The CBPP's is a liberal think tank thus anything they come up with will be biased toward government programs being good for us.

    There has got to be a better way to improve people's lives and the lives of their children that doesn't hand those people a big hunk of money(govt.'s answer to ALL problems!)that was coerced from other citizen's labor.
    America shouldn't be the land of the free lunch(not meant literally), it should be the land of opportunity.
    Everyone has the opportunity to succeed or fail. Failing is an option in America.
    I don't have the answers(otherwise I'd be running for office)but I do know that you can't "save" everyone in this life.

    I do know that if people finished high school, got a job and got married before having children they would have a 98% chance of not living in poverty.
    That quote is from the NYC Human Resources/Dept of Social Services, one of the most liberal agencies in the country. Of course telling people to stay in school, don't have unprotected sex and finding a committed legal partner before procreating really doesn't go over well in our current "do what feels good and don't worry about the consequences" society. lol

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    1. I'm one of those people who finished high school (and also got a bachelor's degree) and was married for seven years before I had any children. We were firmly in the middle class until the last recession and we've never been able to climb back up. I don't know if losing his job and the endless job interviews afterwards ultimately caused my ex-husband's breakdown or if it would've happened anyway. But now my three children and I are trying to survive on my paycheck. I thank God every day for the EAC because it allows me to catch up on bills (most of them medical bills for my son's chronic illness) and maybe even put a little aside for emergencies. My "big electronics purchase?" A new vacuum cleaner because my old one kept overheating and dying on me.

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  6. I agree with you 100%. I used to work PT at a tax service, and it ALWAYS seemed the majority of the folks who would pay that extra $$$$ to have their check "back" within a few days were the ones who could least afford to spend that extra money (who could really use it!). Made absolutely NO sense to me - they should NOT be permitted to waste tax payer money (because you KNOW they aren't shelling that $$ out up-front - it's withheld from the check) to get their check back quickly like that! Use to make me absolutely crazy!!

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  7. I'm one of those people who earns the earned income credit. First of all, as opposed to the other options you propose, you must WORK to get EARNED INCOME credit. I work full time 40 hours a week. I get full benefits from my work. I still get earned income credit. This year I used the money to pay off the doctor for my son's eye surgery (we don't qualify for medicaid) pay off a loan from my dad to get a working car to get to work in. I used it to pay off a credit card that I used to get food for my family and I paid off a tax bill that my children's father left me with. Oh, I also bought a new vacuum cleaner because my old one kept over-heating. There is your big expensive electronics purchase. Sorry I offended your sensibilities.

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