Earned Income Credit
This is perhaps one of the best ways the government has
introduced, to date, to raise families out of poverty, while
requiring them to remain productive citizens. The Earned Income
Credit is a refundable credit, that can be received even if no
tax due--that makes it a negative income tax. It's the best
investment in America's working poor to date, and it is becoming
a widely used tool to aid the individual taxpayer.
The Earned Income Credit was brought to the forefront in 1998 by
President Clinton, as a means of alleviating the taxing of
working families into poverty. What has the earned income credit
accomplished over the life of its existence? The earned income
credit has provided some additional $3000 dollars per year to
families of poverty level incomes; this has enabled better
living conditions, better living standards, and a continued
march to economic independence for many of these families.
How does the earned income credit work, and who qualifies, let's
take a look. The earned income credit is a special tax benefit
for working taxpayers with low or moderate incomes. For
individuals earning less than certain specific levels with or
without qualifying children, there is a tax credit that enables
these individuals to receive a credit against taxes due, or a
refund of income tax, that is known as a negative income tax.
How do you qualify for the earned income credit? Well the
qualification process is very simple; taxpayers with no
qualifying children who earned less than $12120 over the year
qualify for a small earned income credit. Taxpayers with
qualifying children who earned less than $36,348 for the year
will qualify for the earned income credit.
The maximum amount that can be refunded is $4400 for this tax
year, and that is in addition to any refund of taxes already
paid. As you can see, the benefit here can be great at tax time,
and many families rely upon this aid in order to get them
through the year.
But, is it the great benefit it appears, or is it one more
opportunity for abuse? The answer here is yes, and yes. The
earned income credit is the great benefit that it appears, in
that the only way to qualify is to have earned income. This
equates to the need and requirement to become a working citizen;
you must work and make a contribution in order to qualify. The
opposite is also true; many individuals work only long enough to
qualify, return to the welfare state, and then also receive a
huge tax refund each year. The earned income tax credit should
be amended to include a stipulation requiring the taxpayer to
obtain gainful employment for at least 9 months each year. This
would eliminate the eligibility for welfare in most cases, and
create the desired effect of productive, working citizenry.
In addition to the obvious opportunity for abuse discussed
above, there's another abuse that is rampant among the poorer
citizens of this country: individual taxpayers are claiming
dependents that are really not theirs to claim. The refund
however, is much larger is children are shared among eligible
family members. Instead of only one individual receiving a
refund for three children of at most $4400; you now can have two
individuals receiving refunds of $2662 and $4400, respectively.
See the problem? Although there are due diligence tests that
are performed by qualified tax professionals to determine a
taxpayer's eligibility, there are some situations where even the
best of preventive measures aren't enough. It is for reasons
such as these, that we tolerate the minor abuses, in order to
help the majority. It is a blessing and a curse at times to live
in a country where we operate for the benefit of the majority.
It means there are times we must simply turn a blind eye to
minor abuses, in order to accommodate the major good.