New Obama Budget Cuts a Program Aimed at Helping Low-Income Americans

Proposed Elimination of Advance EITC Comes One Day After National EITC Awareness Day
  • Publication Date: February 2010

  • Topics: Minimum Wage

WASHINGTON, DC – On Saturday, the White House released details of the President’s proposed budget cuts for 2011. On the chopping block is the Advance Earned Income Tax Credit (EITC), a program which allows very poor working Americans to modestly increase the size of their take-home pay.

Ironically, this announcement came one day after National EITC Awareness Day, on which the White House released a statement praising the EITC, and calling for increased awareness among eligible taxpayers.

The Government Accountability Office (GAO) has determined that there are administrative problems with the Advance EITC program – problems that surely need to be addressed. However, instead of reforming the program, the Obama administration has chosen to eliminate it. Considering that recent IRS data showed nearly 70 percent of the recipients of the Advance EITC make $20,000 or less a year, such a decision could not come at a worse time.

“As the President has acknowledged, the Earned Income Tax Credit is an effective way to provide additional income to those Americans who need it most,” said Michael Saltsman, research fellow with the Employment Policies Institute (EPI). “Unfortunately, the President has proposed eliminating a relatively small, targeted program that advances those benefits and helps these Americans stay afloat in a tough economy.”

In order to claim the EITC, low-income Americans must file a tax return at the start of the following year, after which they receive the credit in one lump sum. However, for those just scraping by, waiting until the year after they are eligible is not a helpful option. The Advance EITC attempts to solve this problem by providing a portion of the year-end credit in each paycheck, thus increasing take-home pay.

“In 2009, Congress raised the minimum wage, and made it harder for less-skilled Americans to get a start in the workforce,” Saltsman continued. “Now, in 2010, the government will make it more difficult for these same Americans to increase the size of their paycheck.”

For comment, contact Allyson Funk at 202-463-7650.

The Employment Policies Institute, www.old.epionline.org, is a non-profit research organization dedicated to studying public policy issues surrounding employment growth. In particular, EPI focuses on issues that affect entry-level employment.