For now, we can say it makes the biggest impact.
In 2011-2012, the first year that the Earned Income Tax Credit went into effect, the average federal worker spent about 40 hours a week on their taxes, according to Tax Foundation analysis of Census Bureau data. By contrast, those workers got an average of $20.80 per hour for their wages, and that was on the lower end of the labor market.
And even though the EITC is supposed to benefit low- and middle-income workers the most, many of those workers are doing very little to help pay for what the government is currently giving out. In 2006, the average EITC benefit was just $1.70 a week, meaning the benefit didn’t really help people with modest income. In fact, the benefit was only 50% of federal poverty levels.
In addition to making taxes go up on low- and middle-income workers, a more generous program with more federal dollars means more money to state and local governments. In 2007, the federal government provided an average of $4.6 billion in EITC benefits per year to states and localities. In 2013, that number jumped to $6.6 billion.
Those benefits were used to lower income taxes, and so many Americans didn’t feel as if the government was taking from them to support other Americans in need. That’s despite the fact that the economy was in a recession. The recession did lead to cuts to many government programs, even though the stimulus plan helped millions of Americans who needed it most.
It’s worth looking at these numbers in context.
In 2013, the average federal salary in the U.S., including the EITC was about $52,700, according to a Congressional Budget Office report. In contrast, it was just above the figure for the average annual income of the average American. In other words, for some households, money was getting squeezed out of them more often.
Even if we include the benefits, we’d argue that those gains don’t make up for the lost money. The economy is still recovering from the 2008-2009 recession, and tax cuts don’t fix the issues that caused the recession, such as excessive spending and a lack of demand.
Still, government benefits provide a huge boost to incomes, and even though the EITC is just not as broad as it used to be, the programs continue to make up a big chunk of people’s incomes. Here’s