Senator Marco Rubio, R-Fla., plans to introduce legislation that would provide a replacement for the Earned Income Tax Credit in the form of a “wage enhancement.”
In a speech last week marking the 50th anniversary of the “War on Poverty” of the Lyndon B. Johnson administration, Rubio—a possible contender for the presidency in 2016—discussed the impoverished background of his parents, who emigrated to the U.S. from Cuba. He pointed out that poverty is still a major problem in the U.S., but contended that the problem stems more from lack of mobility in society than from income inequality. Rubio rejected the Obama administration’s call for raising the minimum wage, but instead suggested a number of reforms, including replacing the Earned Income Tax Credit.
“We should pursue reforms that encourage and reward work,” Rubio said in a speech last Wednesday. “That’s why I am developing legislation to replace the Earned Income Tax Credit with a federal wage enhancement for qualifying low-wage jobs. This would allow an unemployed individual to take a job that pays, say, $18,000 a year—which on its own is not enough to make ends meet—but then receive a federal enhancement to make the job a more enticing alternative to collecting unemployment insurance.”
Rubio noted that his proposal would allow single taxpayers to benefit from the “wage enhancement,” which the EITC often does not allow.
“Unlike the Earned Income Tax Credit, my proposal would apply the same to singles as it would to married couples and families with children,” said Rubio. “It would also be a preferable means of distributing benefits since it would arrive in sync with a monthly paycheck rather than a year-end lump-sum credit. And it’s a better way of supporting low-income workers than simply raising the minimum wage.”
Rubio claimed his proposal would be able to avoid fraud and abuse, a frequent problem with the EITC that has led the Internal Revenue Service to require paid tax preparers to complete a Form 8867 due diligence checklist when clients claim the EITC, or else face a $500 penalty.
“Of course, the enhancement will be highly targeted to avoid fraud or abuse, and the amount will depend on a range of factors,” said Rubio. “But we know that by promoting work over dependence, this reform would increase workforce participation in struggling communities and, in turn, would have numerous social, economic and cultural benefits to areas hardest hit by the Great Recession.”
Rubio also called for skills training for workers who are stuck in low-wage jobs, as well as a “Flex Fund” that would streamline most of the existing federal anti-poverty funding into a single agency that would then transfer the Flex Funds each year to the states so they could design and fund their own initiatives to address the factors behind “inequality of opportunity.”