Double the Earned Income Tax Credit for Workers Without Qualifying Children

The earned income tax credit (EITC) is a targeted subsidy for low-income working families. The value of the EITC is a fixed percentage of earned income until the credit reaches its maximum. The EITC stays at its maximum value as earned income continues to increase, until earnings reach a phaseout threshold, above which the credit drops by a fixed percentage for each additional dollar of income over the phaseout threshold. The EITC is a fully refundable credit. The EITC’s rates and thresholds depend on a taxpayer’s filing status and number of qualifying children.

This option doubles the phase-in rate of the EITC for childless filers from its current 7.65 percent to 15.3 percent, increasing the maximum EITC for taxpayers without qualifying children to $1,075 in 2027. The change would decrease marginal tax rates on taxpayers in the EITC phase-in range but increase marginal tax rates on taxpayers in the phaseout range.

On a conventional basis, this option would increase the primary deficit by $121.3 billion over the budget window. Long-run GDP and GNP would decline slightly. On a dynamic basis, the primary deficit would increase by $136.8 billion from 2027 through 2036, $15.5 billion more than the conventional estimate. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be higher than baseline, reaching 176.6 percent by 2056.

Expanding the EITC would benefit taxpayers in the bottom two quintiles. In 2036, the bottom quintile would experience an increase in after-tax income of 1.6 percent, while the top three quintiles would see no change.