The Earned Income Tax Credit is Racist


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Wages for Housework Campaign

Ife Floyd has a piece over at the Center on Budget and Policy Priorities (CBPP) in which she advocates for the elimination of family caps in the Temporary Assistance for Needy Families (TANF) program. Family caps are benefit formula rules that stop taking into consideration how many children a family has beyond a certain number. Floyd argues that these kinds of rules are racist, both in history and in practice, and so they should be repealed.

I agree with Floyd’s argument and hope that states will take her advice and scrap the family caps. I also think we should identify other areas of the welfare state where racist family caps are being used and get rid of them.

The Earned Income Tax Credit (EITC) currently has a family cap at 3 children. Families receive higher EITC benefits when they go from having one child to having two and when they go from having two children to having three, but not for any subsequent children they have.

More racist still is the EITC’s phase in, which provides no or only partial benefits to families with no or very low earnings. This group is disproportionately nonwhite.

The obvious way to fix these two racist design features of the EITC is to replace it, and the Child Tax Credit (CTC), with a universal child allowance. The way this would work is that every family caring for minor children would receive a check each month (e.g. $350) for every child they are taking care of. This would eliminate the EITC’s family cap and get rid of the scenario in which families with no or very low earnings are excluded from the full benefit.

There has been some interest lately in reforming the EITC and the CTC within the Democratic party, which has culminated in the Working Families Tax Relief Act. These reform efforts have made some decent steps in the right direction, but sadly still retain the racist EITC family caps while excluding no or very low earners from the full amount of child benefits provided by the EITC.

If CTC and EITC reform is taken up in the next year, e.g. by a Joe Biden administration, I hope we can all work together to make sure that these racist features of current proposals are stripped out of the final bills. Perhaps CBPP can lead the fight.