Presidents of both parties have said the best anti-poverty program is a job. The Federal Earned Income Tax Credit (EITC), designed to promote work for lower-income workers, is probably the most effective anti-poverty program on the federal books. To receive the EITC, individuals must work and have an earned income. The program enjoys strong bipartisan support.
The EITC, however, has complicated eligibility rules that lead to high error rates. Its current structure includes economic disincentives for some workers and may include a marriage penalty for others. Despite these flaws, the overwhelming consensus is that the EITC is a highly effective and targeted mechanism to encourage work and reduce poverty.
The Biden Administration has proposed to extend a temporary expansion of the EITC that expired at the end of 2021 for childless workers that nearly tripled the credit and expanded eligibility. While this expansion increased incentives to work for low-income individuals, there were concerns that it also had the effect of expanding a marriage penalty for those eligible for the EITC.
There are numerous proposals to expand the EITC but regardless of the proposal, it is going to have a significant cost. For example, a permanent expansion of the childless EITC would cost $135 billion over ten years according to the CBO. One means of offsetting the cost of expanding the EITC could be through work requirements or time limits for federal assistance for able bodied adults without children. Work requirements are controversial but tying work requirements to an expansion of the EITC would plow any savings into enhanced support for low-income workers. It would also enhance work incentives beyond just an expansion of the EITC.