Earned Income Tax Credit’s Age Restriction Should Stay in the Past

In March 2021, policymakers removed outdated age restrictions that limited access to the earned income tax credit (EITC) for childless workers ages 19-24 and those over 64. Thus, millions of taxpayers became eligible for one of the most important programs that lifts many working poor out of poverty and encourages them to work. Yet the fix was only temporary: it expired on December 31, 2021. The Build Back Better package proposes to extend the provision, but today its fate hangs in the balance in Congress. The reality, meanwhile, is that the EITC age restrictions made little sense prior to 2021 and make even less sense today.

The EITC age restrictions mean that workers from the excluded age groups take home less money after taxes than identical workers between the ages of 25 and 64. For example, in 2021, a worker without children earning $10,000 might qualify for a $1,500 credit. Upon policy expiration, the excluded workers receive about 15 percent less in after-tax wages than those who qualify. In short, the EITC age restrictions put some of the most vulnerable at a disadvantage solely because of their age.

Age Restriction Hurts Low-Income Workers and Retirees

A return of the age restriction for workers over 64 may become an obstacle to work, making navigating the aftermath of the COVID-19 recession more difficult for older low-income workers forced into early retirement. These recent retirees may lack stable sources of income necessary to sustain basic living standards over the longer term. Returning to the labor force may be the only viable way to stay out of poverty for many.

Creating artificial barriers to work, such as the EITC age restriction, is counterproductive to people’s financial security both in the immediate and long term. The age restriction lessens the ability of low-income workers and recent retirees to fend for themselves. It may also put avoidable pressure on a variety of social supports and services. These detrimental effects may last well beyond the immediate aftermath of the COVID-19 recession, as many in the forthcoming retirement cohorts may face a similar predicament.

Age Restriction Hurts Businesses

Failing to extend the 2021 policy would also be a dubious move for the broader economy. It might make life harder for employers already struggling to find workers. Among the highest vacancies are jobs that low-income workers—the target of the EITC—would likely fill. Some observers, in fact, directly link labor shortages to the low participation of older workers. Attracting older workers who typically do not have young children may be particularly valuable today, as an unstable child-care situation hampers the availability of working parents.

A Matter of Basic Fairness, Sound Economics, and Common Sense

Eliminating the EITC age restriction would be one step towards a policy paradigm that reflects modern-day realities. In the context of ongoing labor market and demographic changes, policymakers should cast aside the outdated view of working past 64 as something unusual and unnecessary. For many low-income older Americans, working later in life is a must. Keeping those workers in the labor force also can help address today’s acute labor shortage. Removing the EITC age restriction is a part of the framework that would facilitate working past 64 and, in doing so, help confront today’s and tomorrow’s challenges. Policymakers should extend the measure on its own merits as a matter of basic fairness, sound economics, and common sense.