Coffman Introduces EARN IT Act

Press Release

Today, U.S. Representative Mike Coffman (CO-06) introduced the EARN IT Act, Enhancing Advancement, Reducing Noncompliance, and Improving Trust Act. The legislation is co-sponsored by Representatives Tim Walz (D-MN) and Cresent Hardy (R-NV).

The Earned Income Tax Credit (EITC) rewards work for low-income workers and families by adding to their income through a refundable tax credit. The Tax Policy Center of the Brookings Institution notes that, "The EITC is the single most effective antipoverty program targeted at working-age households." Initially the tax credit phases in, meaning workers get a larger credit the more they earn; then it gradually phases out, meaning the credit shrinks as wages grow to the point that workers no longer need it.

"I grew up in a working class neighborhood and I fully understand the importance and the value of work over welfare. This is why increasing incentives to reward work is so important and this legislation does exactly that," said Coffman.

Under current law, the EITC benefits mostly low to moderate adult workers with children over the age of 25 but gives very little help to low income single adults. For example, a childless worker can only participate in the program with an adjusted gross income below $14,820 and could receive $503 while a worker with three or more children, with an adjusted gross income as high as $47,747 could receive $6,242.

The EARN IT legislation expands the credit for childless workers, especially young, single people at the beginning of their careers. Specifically, the bill would:

Raise the maximum credit for childless adults;

Raise the phase-in and phase-out rates so the credit grows more quickly, then shrinks more quickly as income nears the maximum;

Phase the credit in and out over a greater range of incomes; and,

Reduce the minimum age to claim the credit from 25 to 21.

The bill is a bipartisan effort. In 2013, then-Budget Committee Chairman Paul Ryan proposed expanding the EITC to childless adults. President Obama has also put forward a similar proposal in his annual budget. Increasing the EITC, unlike increases in the minimum wage, does not discourage employers from hiring low skilled entry-level workers by raising their cost of doing business.

In 2014, the nonpartisan Congressional Research Office (CBO) did a study on what the impact would be of raising the federal minimum wage to $10.10 an hour and their study concluded that the increase in the minimum wage would result in lifting 900,000 workers out of poverty but at a cost to the economy of 500,000 jobs.

"This bill will increase assistance for low wage workers without causing job losses," said Coffman.

Increasing the EITC will have an additional cost to the U.S. Treasury. To offset this, the EARN IT proposal also includes cost savings generated from tightening up the enforcement and preventing fraud to make sure that only those who meet the eligibility requirements for the EITC are drawing it. According to the Joint Committee on Taxation, doing so would result in a net savings of $3.7 billion over the 10-year budget window which is more than enough to pay for increasing the EITC for low wage workers who need additional help.

"I'm pleased to have the support of both Republicans and Democrats on this important legislation. Standing up for low wage workers is not a partisan issue but it's an issue we can all support," said Coffman.

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