Talk:Earned income tax credit
From Wikipedia, the free encyclopedia
 |
This article is within the scope of WikiProject Taxation, an effort to create, expand, organize, and improve Tax related articles to a feature-quality standard. |
Half this article is based on speculation.
Credit for the EITC should be given to Friedman. He was the one who proposed negative income tax for those on welfare.
None of this article is based on speculation.
Here's some websites: http://www.tax-coalition.org http://www.cbpp.org/7-19-05eic.htm http://thomas.loc.gov/cgi-bin/query/z?r103:H30JY3-70:
LegCircus 04:32, 3 November 2005 (UTC)
Contents |
[edit] "If you leave the violent spouse in October . . . "
Well, if you leave the violent spouse in October, per IRS regulations, you will not be able to classify for Head of Household, and consequently you will not get Earned Income Credit.
This is an example of regulations not being realistic to actual real-world situations. If you leave the violent spouse in February--and good for you!--you ought to be able to file as Head of Household or Single simply because you choose to so file.
If we're so afraid of people gaming the system, for example, switching back and forth between married joint and married separate depending on the circumstances of the tax year, then we could adopt something similar to the Look-Back Rule for 1231 property. Now, 1231 business property is generally land, building, or equipment held for a year or more. It's not technically capital gains property but it receives capital gain treatment, even more favorably, for you receive ordinary losses and capital gains (truly the original alchemy of taxes!). And so, there's the Look-Back Rule. When you have a 1231 gain for the current year, you must first "look back" and see how much 1231 loss you declared for the previous five years. Up to that extent, the current year's gain is ordinary gain. Anything past that is taxed as capital gain.
So, we could do the same thing with filing status, perhaps going back three years, which is as long as individuals are required to keep records. I think it would be sufficient to just go back just one year. If you wish to go back to filing married joint after filing married separate, you must file an amended return for the last year's married separate.
As far as the harm of family violence, we can look at the burden President Clinton carried, and a situation he handled about as well as any fifteen year-old boy could. The story his mother told in his film biography during the '92 Democratic Convention. His step-dad drank and sometimes became violent. Bill went into the room, got right in his Dad's face and said, 'Daddy, stand up, there's something I got to tell you. Now, if you can't stand up, I'll help you stand up, but you got to be standing for what I have to say.' When he stood up, Bill told him that he would not hit Mom again.
I love the way he was both strong and respectful. But it probably wasn't enough. The baseline for habits of violence is of such long history. And the Dad probably took it personally. Instead of thinking about it the next day and welcoming that his son was becoming a man, he probably took it personally and took it as a threat. And even though he may not have been as big as Bill, he was probably wily. The violence probably continued. And his mother probably stayed with him.
Bill was basically a rage-aholic during his political life. Staff members that put up with it viewed it as a Summer thunderstorm, something that suddenly came and suddenly went. But that's no way to treat people. You see, he wasn't able to protect his mother, despite his very best efforts.
- What the...?Isaac Crumm 00:18, 23 January 2007 (UTC)
-
- Well, I may not have pulled it off! What I was trying to do was to include both the accurate technical details and the nitty gritty of real life, for that's when you get really good public policy. So, Isacc, perhaps where I've fumbled it, you can pick up the ball and advance it forward.
-
- Married filing separately is a punitive filing status, and I argue unnecessarily so. And this unfairness will be borne most heavily, maybe not in actual tax dollars, but in living standards, by those with the least income and/or by those in the most vulnerable situations. Furthermore, family violence is not a one out of a million phenomenon. Oh no, it's not a rare bird. Not at all. The lives of many, many people would be better off if it were, but it just isn't. It is a relative common phenomenon. And it's hard enough for someone to leave this type of situation as it is. We do not need the tax code adding yet one more obstacle. FriendlyRiverOtter
[edit] Impact
I don't see how the deleted portion was biased or in any way bad (it was an official government website which was cited) and I think that it demonstrates the fact that the EITC has a huge impact on the working poor. I don't see why it shouldn't be included, so I've added it back in. Jackson744 06:37, 23 April 2006 (UTC)
[edit] RALs, H&R Block, Tax Season 2003
RAL is a Refund Anticipation Loan. I worked in a New England branch of H&R Block from January to April 2003 and did about 220 individual returns.
First the good parts. Some of the customers were an absolute delight and would tend to really open up toward the end of the interview. One farmer, after we had talked about animals earlier, showed me a picture of his cat and said, 'That's my Friend.' One young woman, who was making pretty modest income that year, shared with me her hopes of going to nursing school. And my co-workers impressed me as very dedicated individuals. Looking back on a number of discussions, Wow, we really wanted to get it right. As it ended up, since we were in a college town, the single most useful bit of advice that I was able to give clients was, Yes, you can still get it with a loan. As long as you are responsible for the debt, you can still get either the Hope Scholarship Credit or the Lifetime Learning Credit for tuition paid for by a student loan (as long as you qualify otherwise of course!).
What wasn't so cool were the refund loans. First off, the interest rates were really high, "85% interest," "65% interest," "126% interest." And then, these interest rates were not disclosed until the end of the whole process, when the client had already done an half hour's work in answering questions, many of them personal.
Then there were fees that were not included in the interest rate. There was a fee on the part of H&R Block and there was a bank fee, the two of them totalling just shy of 61 dollars. These were over and above the actual tax prep fees.
Then, two people had ALL of their money taken by the bank! This was called "debt offset," and that's all the information the bank would tell either the client or us when we called. This wasn't child support. This wasn't a delinquent student loan. This was the bank collecting consumer debt, either credit card, cell phone, whatever (this industry practice is also called "cross collection"). One man was due a refund of about $1200 and got none of it from the bank. One lady was due a refund of about $4500 and got none of it from the bank. She was in tears on the phone. They were both my clients. Out of my grand total of 220 clients for the season, these two were in a subset of approximately 100 who took a bank product. So maybe someone who's good in statistics can tell us, if we hit two times out of a hundred in a sampling, what's the range it easily could hit if that sampling is taken many, many times, and what's our percentage confidence in that interval. To me, it could easily have been zero, it could have easily been five.
And no, this was not adequately disclosed. It was buried in a long loan application in vague language.
The bank was Household Finance. They are one of a few large banks who serve Block and other large national tax preparers. The situation is more of an oligopoly than it is of genuine competition.
I don't think we can fully discuss Earned Income Credit without discussing RALs. When we discuss the big aggregate numbers (and we're a big country with 300 million people, and just like with Social Security, the aggregate numbers are going to be big numbers), a certain percentage of that money is being skimmed off the top and going to banks. In fact, a case could be made that RALs are the engine which drive the tax prep industry.
(People's most common complaint was that they did not get the loan after having their hope built up, and seemingly for stupid reasons when they had a perfectly good tax return. They then didn't have to pay the interest, but they were still stuck with the bank and had to pay the account fees. They got their money--most times!--when the IRS issued the refund in one to two weeks.)FriendlyRiverOtter 20:36, 11 February 2007 (UTC)
[edit] To abstract: missing examples
The article should add examples with the situation before and after for low-income earners making e.g. $5,000 and $10,000 including all other taxes.
The explaination of how EITC works is unclear. Do you get the refund in cash the year after? Is it deducted from other taxes: payroll taxes ? state taxes?
What is the total tax burden for these people?
The figure is impossible to understand for non-neoclassical economists.
MaxPont 08:27, 27 September 2006 (UTC)
Okay, let's do some numbers for tax year 2006.
$5,000 income, no children --> $384 earned income credit
$5,000 income, one child --> $1,709 earned income credit
$5,000 income, two or more children --> $2,010 earned income credit
$10,000 income, no children, single --> $160 earned income credit
$10,000 income, no children, married joint --> $313 earned income credit
$10,000 income, one child --> $2,747 earned income credit
$10,000 income, two or more children --> $4,010
(For claiming the credit with child(ren) at $10,000, it doesn't matter whether you're married or not because you're not yet in phase-out range.)
Most people get the credit in cash when they file their taxes toward the beginning of the next year (after they receive their W-2s late January or early February). A few people get it throughout the year by filing a W-5.
For a person or couple without income, EIC exactly matches the 7.65% paid in social security. For people with children, it's considerably more. As far as other taxes, it would take a substantial economic discussion. Low-income persons typically rent rather than own housing and thus indirectly pay property taxes, plus do not have the tax benefit of deducting mortgage interest. Then there's the interesting thesis that the poor pay more: for groceries at stores located in low-income neighborhoods, for washing clothes at laundromats rather than buying their own machines, etc, etc. And most of all, I hope we can discuss the seeming observation that modern economies do not create enough jobs, much less enough good jobs.
And for the person who said a graph would be helpful, I heartily second the motion! [1] This is a good basic graph, although now a couple of years old.
FriendlyRiverOtter 04:37, 22 February 2007 (UTC)
[edit] Where are 2006 EITC parameters?
I've just spent several hours trying to dig up the precise parameters for the 2006 tax year EITC (i.e., for each filing status, what is the ramp up rate, the maxiumum credit, and the phrase out rate). I've found historical data, which I've linked to, but nothing from the last couple of years. Any hints? The article gives some of the information, but I'd like to include more or it, as well as a citation of a more official source for the figures. -- Ryguasu 06:02, 26 January 2007 (UTC)
Okay, I found some figures here that the Tax Policy Center has assembled. Good stuff, and I've referenced it in the article. I still wish there were a source on a government website, though. You'd think the IRS, the Congressional Budget Office, the Weighs and Means Committee, or somewhere, would put it on their site. It appears to be hard to locate. The Tax Policy Center, for its 2006 figures, cites http://www.irs.gov/pub/irs-drop/rp-05-70.pdf as the source of its figured. The document's header says "26 CFR 601.602", and a bit of sleuthing reveals that CFR is the Code of Federal Regulations, and that title 26 pertains to "Internal Revenue". I don't want to cite this document in the article, however, because I don't understand its legal status. Is it the sort of thing that could be ammended after publication, for instance? I don't know. There should really be a more nicely formatted document out there, one with a header that would make it trivial to discern what the document is about and who publishes it. -- Ryguasu 26 January 2007
[edit] Graphs?
I've seen a few presentations of the EITC that include a graph of how the credit varies with income. I'm wondering if one would be appropriate here. http://www.cbpp.org/4-10-06tax.htm has an example graph. This graph has the caption "Source: Congressional Budget Office", which might mean the graph is produced by the Office, in which case it's in the public domain. But maybe we'd need to make our own graph. Ryguasu 03:39, 27 January 2007 (UTC)
[edit] Rename this article
This article should be renamed to Earned Income Tax Credit (note the capitalizations). ~ UBeR 01:08, 13 February 2007 (UTC)
