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Obama’s Budget Would Expand Tax Credit for Older Workers
Posted By Eileen Ambrose On March 4, 2014 @ 2:16 pm In Money Talk | No Comments
More lower-income people, and more older workers, would be eligible for the earned income tax credit (EITC) under President Barack Obama’s proposed fiscal 2015 budget, although this expansion would come at a cost to the wealthiest Americans.
The president’s budget would expand the EITC for workers without children. The maximum credit for childless workers in 2015 is $503, and the credit fully phases out once income reaches $14,790 for singles and $20,290 for joint filers.
The White House says the current amount is so small that it provides little help and no incentive to work. The budget proposes to double the credit to $1,005 and raise the income limit of the phase-out to $18,070 for singles and $23,570 for joint filers.
The age limits to qualify for the credit also would be changed. Currently, workers must be at least 25 and no more than 64. The president proposes to make the credit available to workers who are at least 21 and under 67.
According to White House figures, these changes would increase the credit for 7.7 million workers while making 5.8 million newly eligible for it.
How likely is the president’s budget to pass?
“His budget is dead on arrival,” says Roberton Williams, a senior fellow at the Urban-Brookings Tax Policy Center. “It’s just a matter that nothing could be proposed that would be happily accepted by both sides of the aisle. Their goals are so different.”
(Policy experts note that you would have to go back to the Clinton administration in the early 1990s to find a president’s budget that wasn’t immediately dismissed as dead in the water.)
Still, Williams says the expansion of the Earned Income Tax Credit to help more low-income workers does have bipartisan support.
The president proposes to pay for this expansion by eliminating some tax provisions used by the wealthy, such as taxing so-called carried interest (a popular strategy used by hedge fund managers) at ordinary income tax rates instead of the lower capital gains tax rate.
The wealthy would also take a hit on other perennial recommendations by the president.
He wants to cap deductions at a tax rate of 28 percent, a move that the White House says would affect the top 3 percent of the wealthiest Americans; require those earning more than $1 million to pay at least 30 percent of income in taxes; and prevent people who have already socked away more than $3 million in tax-preferred retirement accounts from continuing to add money to them.
The president once again proposes the creation of an automatic individual retirement account that would require certain employers to provide access to an IRA through payroll deductions. This would be in addition to Obama’s recently announced myRA program, in which employers can voluntarily allow workers to contribute to a Roth IRA through payroll deductions.
As previously reported, this time around the president dropped a proposal to tie Social Security cost of living adjustments to the chained Consumer Price Index, a more conservative measure of inflation.
Ed Lorenzen, senior adviser at the Committee for a Responsible Federal Budget, says this budget represents a modest vision. Given that this is an era of large deficits and deep debt, the country has “limited flexibility to do anything significant,” he says.
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