Fair wages would eliminate EITC

Date: 5/22/2015

It is in the news that the Governor wants to eliminate the Movie Production Tax Credit and use the money saved to increase the Earned Income Tax Credit (EITC).  The EITC is an odd beast. I believe it was invented in the 1980’s. I say “odd” because on the surface it is difficult to understand why those who usually oppose all taxes would endorse the EITC.  It is after all the pure distilled essence of redistribution, a word that tax opponents have turned into a borderline obscenity. Yet the EITC has the IRS or state Department of Revenue collecting taxes from workers above the qualifying threshold and writing checks to people who are in fact working, but earning too little to survive. Pure redistribution.

To solve the problem of people who work but still cannot afford the basics of life, we do not need any redistribution of income; we only need a decent, fair, initial distribution of the wealth generated through their labor.  Pay people properly and they will not need the redistributive programs such as EITC, food stamps, housing subsidy. While all those programs may be the caring things we do for our fellow citizens, they should really be focused on those unable to work or to work full time.  If a person is able to work 40 hours a week, that person should be paid enough to live without assistance.

Our complex modern economy has developed these programs to help the poor, but in their implementation they are often distorted into subsidies for large corporations.  By manipulating hours worked and wage rates, the fast food and mass retail industries are able to employ a workforce that is subsidized by the general taxpayer. Yes, the EITC does help the low wage worker by giving him/her more money, but it also helps the employer by in effect subsidizing their payroll costs. The employer is able to hire someone at a wage less than what that person needs live in the community.  This is a corruption of the intent of those programs, it should not be tolerated.

The better way to help someone who is working but still cannot get by is the minimum wage law. A minimum wage that is at a level that we generally refer to as a “living wage” would put the true cost of labor where it belongs, on the employer. The EITC and other subsidies that go to working people simply distort the economic structure by giving some employers support from the general taxpayer.

Massachusetts made a small step in the right direction last January by raising the minimum wage to $9 per hour. And next January, another $1 will be added to the minimum. But why wait? Why not have that increase on July 1 and then another dollar next January?  That would begin to put the minimum closer to a realistic living wage. The EITC would then disappear or be greatly diminished because no one who is working full time would qualify.

Paul M. Martin
Springfield