A Bold New Idea to Boost Wages

Robert Reich

Robert Reich Former U.S. Secretary of Labor, Professor at Berkeley

The challenges are well known: Working Americans are struggling to keep up with the increasing cost of living. Unemployment is low, but wages of most Americans have remained flat. More than three-quarters of Americans are now living paycheck to paycheck. Most can’t afford a $500 emergency.

There’s a simple and bold solution that would cost about as much as the Trump tax cut. But instead of helping corporations and the rich, it would help millions of working and middle-class Americans by putting money directly in their pockets.

I’m talking about expanding something called the Earned Income Tax Credit, or EITC. And although it’s been around for decades, it can be the basis of a revolutionary change in the lives of millions of people. 

As it now stands, the EITC gives thousands of dollars to the working poor, with the amount of money they receive gradually decreasing as their earnings rise until they reach a cap, which is now a little over $50,000.

It works so well because it directly boosts the incomes of people who need it the most. Cash gives people freedom and dignity— the power to decide, for example, whether to have their car repaired or buy new shoes for their kids or save for a rainy day. 

When working people have money to spend, they spend most of it in the communities they live in. This, in turn, causes businesses to hire more people to meet the demand. It’s a virtuous cycle that lessens poverty, makes the tax code fairer, and boosts the overall economy.

A bold new idea would be to expand this successful program in 4 simple ways:

First: Raise the maximum amount that very poor Americans receive from the Earned Income Tax Credit by several thousand dollars. This would dramatically reduce poverty in all families with someone who works full time. 

Right now, a job at a $15 minimum wage plus Medicaid and food stamps still doesn’t meet basic needs in much of America. Raising the Earned Income Tax Credit would ensure that every family with a full-time worker is out of poverty.

Second: Extend the Earned Income Tax Credit into the middle class, so even families earning the median family income – which was just about $76,000 in 2017 – will benefit. This would be a huge help to working-class families, many of whom are now one paycheck away from poverty.

Third: Expand the benefits of the Earned Income Tax Credit to two groups of Americans who are working hard, but not necessarily collecting paychecks: people (most of whom are women) who are caring for a child or for a senior in their family, and low-income students.

Fourth: Let people receive this money each month rather than in a lump-sum once a year at tax time, so it helps with monthly expenses – rent, food, education – or can be saved to build a financial cushion.

Presto. We create a kind of cost-of-living refund to lift the incomes of a third of Americans, the people who need it most, and we also include the working class and lower middle class. 

At the same time, we begin to rewrite the tax code in favor of ordinary Americans, instead of large corporations and the wealthy. 

Eighty-three percent of the benefits of the Trump tax cuts will go to the top 1 percent of Americans by 2027. Expanding and modernizing the Earned Income Tax Credit can help put things back in balance.

It’s simple. It’s fair. It’s necessary. It’s big and bold. Enlarge and expand the Earned Income Tax Credit. 

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Reposted from Robert Reich

Robert Reich served as the nation’s 22nd Secretary of Labor and now is a professor of public policy at the University of California at Berkeley. His latest book, Aftershock: The Next Economy and America’s Future, is now in bookstores. His earlier book, “Supercapitalism,” is out in paperback. For copies of his articles, books, and public radio commentaries, go to www.RobertReich.org.

Posted In: Allied Approaches

Union Matters

Labor Wins

From the AFL-CIO

On Tuesday, the labor movement drove historic wins for pro-worker candidates like Governor-Elect Andy Beshear in Kentucky and new legislative majorities in Virginia. Not only did union members come out to vote in droves, 270 union member candidates were elected to public office last night and counting. This adds to the total of more than 900 union members elected up and down the ballot in last year’s midterms, a product of the Union Member Candidate Program launched by the AFL-CIO just two years ago. The share of union members who won in the 2018 midterms is two-thirds. The program will continue through 2020 and beyond, electing even more union members to public office. 

“Our efforts recruiting, training and supporting labor candidates have led to the passage of pro-worker legislation from coast to coast and everywhere in between,” AFL-CIO President Richard Trumka said.

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