On Thursday, House Budget Committee Chairman Paul Ryan surprised liberals with the release of a new antipoverty plan that may include his best idea ever.
In contrast to Ryan’s last four budgets, which proposed huge cuts to federal antipoverty programs, Ryan’s new proposal is deficit-neutral. In fact, although Ryan still wrongly believes that misaligned incentives and not a lack of jobs are the biggest impediment to workers, part of his proposal even has broad appeal.
This rare area of bipartisan agreement surrounds the Earned Income Tax Credit. The credit is refundable and promotes work, which is why conservatives support it. It increases as low-income workers’ income rises and is slowly phased out at a certain point. In 2012, the credit lifted 6.5 million people out of poverty, including 3.3 million children, according to the CBPP. But the EITC has a huge hole in it: It barely provides any benefits for childless workers. In 2014, a low-income worker with two children is eligible for a maximum of $5,460 in EITC benefits. A childless, low-income worker is eligible for just $503.
There is agreement across the political spectrum that the meager benefits for childless workers are unacceptable. In fact, senators Patty Murray and Marco Rubio as well as President Barack Obama have all proposed expanding the EITC. Ryan and Obama’s plans would both double those benefits to around $1,000. Murray’s proposal would nearly triple the EITC benefits that childless workers can collect, to $1,400. All three plans would lower the age minimum to collect the EITC from 25 years to 21. Rubio’s proposal is a bit more complicated, but has the same goal. He would convert the EITC to a wage subsidy, which is similar to the tax credit, but increases workers’ take-home pay with each paycheck instead of in an annual lump sum payment. The wage subsidy would provide increased benefits to childless adults.
The disagreement arises over how to pay for this expansion. (Everything right now has to be paid for.) Ryan’s proposal would take money from a collection of other antipoverty programs that he believes are ineffective and would eliminate unspecified agricultural and energy subsidies. Murray and Obama both propose closing corporate tax loopholes, something Ryan criticized in his plan. Rubio’s plan, on the other hand, doesn’t really have a spending offset, although he deems it deficit neutral.
In a rational policy world, Democrats and Republicans would probably be able to find common ground here. Murray’s plan, which is the most generous, would cost around $15 billion per year. That’s not small, but it’s not gigantic either. Obama's would cost just $6 billion per year. Ryan’s support for an EITC expansion is particularly important, given his previous commitment to cuts to federal antipoverty programs. That doesn’t mean that policymakers will make this a priority anytime soon. But it gives hope that even as Congress fails to address the multiple crises ongoing in the U.S., there’s a chance it could pass legislation to improve the lives of low-income Americans.