The Brookings Institution
There is a political article of faith: "Don't raise taxes during a recession." Just Google the phrase and you'll find some 2.5 million results. The popular idea is that deeply embedded into our political thinking. Of course it makes economic sense: You want people to spend their money on goods and services. Then producers will hire more people, and people will have more money to spend, yadda yadda.
Here's my concern: While there is consensus to protect the richest Americans — those who pay income taxes — there is little discourse, yet alone agreement, about protecting the poor and the working poor. We hear about saving the middle class, we hear about tax cuts for everyone (except this only applies to the income tax, not to the payroll taxes, a tax that is far more burdensome to those who earn less). But what about those who work hard but don't earn a high wage?
I’ve already written about the zest for cutting government programs and jobs, ideas that will add to the unemployment crisis and take more "spending" money out of the economy. Unemployed people, yes, even people who once worked for the government, don’t spend. This is money that will be subtracted from the economy.
I agree that we need to cut federal spending. We need to balance the budget and pay down the massive debts we’ve accumulated. (This is a position I’ve argued for doing for most of my professional career as a columnist.) But we don't have to do this all at once.
A presidential debt commission will release its proposals in December to balance the budget. A draft is already out there with a few big ticket ideas: Slowly raising the retirement age, making $3 in spending cuts for every dollar in higher revenue, and a flatter income tax structure (and one that generates more revenue). But there are also little proposals, almost meaningless, such as ending the payments to states and tribes for abandoned mines.
One idea that's floating around is to eliminate the Earned Income Tax Credit. This would have terrible consequences for the working poor — especially people who live in Native American communities. The Earned Income Tax Credit is one of the most successful anti-poverty programs ever. It's a tax credit that puts real money back into the pockets of families who are supporting themselves on modest incomes.
A report from the Brookings Institution looking at three decades of the tax credit and puts it this way: "The EITC has proved remarkably successful in reducing poverty. In 2003, the EITC lifted 4.4 million people in low-income, working families out of poverty, more than one-half of them children. Today, the EITC lifts more children out of poverty than any other social program or category of programs. Without it, the poverty rate among children would be 25 percent higher."
The tax credit has been singularly successful on American Indian reservations and in Alaska Native villages. For example: Pull up a map of where the tax credit is most used and you see Indian Country. In many Native communities more than 40 percent of the population now is eligible for this credit. Just peek at Montana’s map for an example. The areas where the EITC is most common are the state’s Indian reservations. Make no mistake about this, reducing or eliminating the Earned Income Tax Credit will have a disproportionate impact on Indian Country.
It is important, over the long haul, to reign in the federal budget. But that cannot be accomplished by stripping away the programs and tax credits that actually make life better for poor, working American families. This proposal is being shopped at the very moment when government services and jobs are already being cut in those same communities.
A sad truth is that the recession doesn’t mean as much in a poor community as a rich one. When unemployment rates are already 50 percent, what difference does a point or two make?
But in this national zeal to balance the budget we should not make the situation worse. If we can make it an article of faith to not raise taxes during a recession, we should also be certain not to make life worse for American who work hard and barely earn enough to support their families.
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