A week ago I provoked some discussion with a post on a 1970s experiment in providing a guaranteed minimum income to a rural community in Manitoba. I put up some back-of-the-envelope numbers that showed South Dakota could redirect half of its $1.4-billion human/health/social services budget to provide over $15K a year to every impoverished household in the state.
The U.S. tax system already hands out something that hints at a guaranteed basic income, but with complications. The Earned Income Tax Credit is not a guaranteed minimum income; it's a hybrid subsidy and incentive. If you don't get out and earn any money, you don't get any credit. But the more money a low-income person earns, the bigger the Earned Income Tax Credit Uncle Sam offers. At a certain income level, we figure a household is getting its head above water and scale back the EITC.
But notice that our Earned Income Tax Credit is as interested in subsidizing kids as in subsidizing low-income work. This table gives the EITC amounts for varying income levels. You can mouse over the charts below to see the credits available to both single (top chart) and married (bottom chart):
Single or married, if you don't have kids, your Earned Income Tax Credit maxes out at $496. We cut singles off at $14,590 and couples off at $20,020. Add kids to the mix, and the EITC jumps into the thousands, while the income thresholds climb.
Consider that the EITC is saying that, if you are married and have two kids, Uncle Same thinks you family deserves $6,143 to help pay the bills, but only if you are working, and only if you're making between $13,650 and $23,250. If health or the economy or bad luck knocks you out of your job and your income drops, the IRS won't help you out as much, although the underlying assumption is that other state and federal welfare programs will.
So what do you like better: our Earned Income Tax Credit, encouraging low-income folks to make more money and trusting other welfare programs to take care of those in deepest need, or the guaranteed minimum income system we talked about last week?
Related Reading: As Todd Epp reported back in November, research from the Center for Rural Affairs finds that 16.2% of South Dakotans claim the Earned Income Tax Credit. That's below the national figure of 19.2%. Rural populations tend to qualify for and claim the EITC more than city dwellers. In South Dakota, 20.1% of rural residents take the EITC, compared with 15.3% in our metro areas. Nationally, the rural/metro split is 21.4% to 18.7%.