Politics, Moderate



This nifty GOP trick will punish the poor and increase the deficit -- at the same time!

Catherine Rampell on

WASHINGTON -- Never accuse Republicans of being uncreative. Once again, they've found an innovative way to punish the poor and simultaneously increase budget deficits -- all with one nifty trick!

To pull off this impressive twofer, they would put every American applying for the earned-income tax credit (EITC) through a sort of mini-audit before getting their refund. This would both place huge new burdens on the working poor and divert scarce Internal Revenue Service resources away from other audit targets, such as big corporations, that offer a much higher return on investment.

For those not familiar, the EITC is basically a way to top up low- and moderate-income people's pay through a tax refund, to give them a bigger payoff from working.

The EITC has an excellent track record both economically and politically. Lots of studies have found that it increases workforce participation, for example. Since its introduction in 1975, it has also received bipartisan support, given its dual purpose as both an anti-poverty and a pro-work program. Both Republican and Democratic presidents have overseen major EITC expansions.

Thanks to a combination of innocent mistakes and outright fraud, though, some EITC money is disbursed erroneously. And so in 2015 Congress passed a bipartisan law to improve the program's integrity. The changes that went into effect this year include a several-week delay in issuing EITC refunds so the IRS can match basic documents such as W-2s and 1099s to tax filers' reported income.

The IRS hasn't yet analyzed the full effect of these changes, though early numbers look promising.

Before the full results are in, however, House Republicans have decided to do something far more drastic.

Sometime in the next few weeks, the House is expected to vote on the fiscal 2018 budget resolution, a procedural step that's designed to pave the way for tax cuts. That's gotten a fair amount of coverage, of course. Less publicized is troubling language in the budget resolution committee report, which proposes decreasing "improper" EITC payments by requiring verification of all income before benefits go out.

The language is vague but appears to refer to a Heritage Foundation proposal that would require the IRS to "fully verify income through a review of Form W-2, Form 1099, business licensing or registration, and relevant invoices" before dispensing any refunds. So, a mini-audit.

As noted in a report from the Center on Budget and Policy Priorities, conducting mini-audits of all 28 million EITC claimants would be an astonishingly laborious task, both for tax filers and for the IRS.


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