Quote:
Originally Posted by stcroixman
This is how it really is. People without experience practing as tax professionals just give biased opinions. Good post!
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you are ignoring the handout that is the EITC both state and federally, not only are many not paying any federal income tax, but many are enjoying free money courtesy of the US taxpayer...
The United States federal Earned Income Tax Credit (EITC or EIC) is a refundable tax credit; it is means tested,
and designed to encourage low-income workers and offset the burden of U.S. payroll taxes. For tax year 2009, a claimant with one qualifying child can receive a maximum credit of $3,043. A claimant with two qualifying children can receive a maximum credit of $5,028.
The credit is expanded for tax year 2009 and 2010. For claimants with three or more qualifying children, the maximum credit is $5,657. Grandparents, aunts, uncles, and siblings can also claim a child as their qualifying child provided they shared residence with the child for more than six months of the tax year. However, in tie-breaker situations in which more than one filer claims the same child, priority will be given to the parent. A foster child also counts provided the child has been officially placed by an agency or court. There is a much more modest EIC for persons and couples without children that reaches a maximum of $457.[1]
Since the Earned Income Tax Credit (EITC) became part of the income tax code in 1975, it has quietly become the largest cash transfer program in the United States. At a cost of more than $44 billion per year, EITC spending dwarfs that of the traditional welfare program—Temporary Assistance for Needy Families (TANF)—and nd food stamps combined. More than 23 million households currently receive the credit.
“From 1985 to 2006, EITC payments grew from $2.1 billion to $44.4 billion, or by an eye-popping 2,014 percent,”. “Total federal income tax revenues rose by 217 percent over that same period. Similarly, the number of returns claiming the EITC rose from 6.4 million to 23 million—an increase of 255 percent—over a perperiod when the total number of federal income tax returns increased by 36 percent.
“Bottom line: Immigrants accounted for about 13 percent of the U.S. population in 2008 but receive an estimated 26 percent of EITC benefits—about $12 billion.”
The most distressing aspect of EITC stems from unlawful immigrants tapping into the program on a massive scale. For example, in Greeley, Colorado this year, district attorney Buck Young raided a tax filing agency to find over 1,000 fraudulent returns by unlawful workers. While they paid little or nothing in taxes, they received hundreds of thousands in bogus returns. That same scam multiplies all over the country.
“Tax relief" goes to people who never paid a cent in taxes, and may have already defrauded the government of huge sums each year. "EITC scams are common, well-organized, and massive," Rubenstein writes in the report.
EITC ranks second out of 57 government programs in fraudulent payments.
“But enthusiasm for the credit has blinded policy makers to its problems. The EITC program is dominated by fraud. Year after year about one-third of all EITC returns are based on illegal multiple returns, phony Social Security numbers, or claims of non-existent children or spouses. A disproportionate share of illegal alien households receives the benefit.
“Washington’s love affair with the EITC has allowed the minimum wage to decline in real value. Native workers have suffered as a result. So have labor unions. In effect, the EITC subsidizes employers who hire low-wage immigrants and reject equally qualified natives. No one should be surprised; therefore, that Wal-mart, the U.S. Chamber of Commerce, and most liberal activist groups are major EITC supporters.
“For most poor families, the tax credit check is the largest single sum of money they will receive during the year. Most receive it after filing income taxes. But some need the money immediately, and they can get it—for a price. A niche financial sector thrives by leending EITC recipients immediate cash in return for a hefty chunk of their credit check. The cost to the poor of these so-called Refund Anticipation Loans (RALs) has been estimated at 6 percent of the entire EITC program.
“Widespread availability of high-interest RALs made poor borrowers easy marks for sub-prime mortgage hucksters. The resulting defaults have pushed the entire economy to the brink of collapse. While the sub-prime story is well known, few are aware of the EITC’s role in introducing the poor to the culture of debt.”
Has the EITC lived up to its hype? In answering this, consider the following:
The EITC originated as an anti-poverty program; the number of the returns claiming EITC benefits rose 25 times faster than the poverty population over the past two decades.
EITC benefits rise sharply with parenthood; poverty rates for families with children have risen faster than those for childless families since the credit was created.
The EITC is the most illegal-immigrant friendly of poverty programs; illegal immigrants constitute a far larger share of the poverty population now.
Implication: The EITC is a textbook case of unintended consequences. Our economic meltdown may be among them.
“The current federal EITC provides large benefits to families with children, mostly single mothers, and minimal benefits to singles, even though declining wages have affected all low-income workers. These disparities create disincentives to work in the formal labor market and for poor men and women to marry, cohabitate, and co-parent,” said Rubenstein. “President Obama’s stimulus package increased EITC payments by $600 for poor families with three or more children, while leaving the program’s perverse disincentives intact. This will merely exacerbate the credit’s bias against work and marriage.”
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