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Blog: Paul Ryan: Let's Work Together to Expand the EITC – AND Increase the Minimum Wage – America Needs Both

Jul 31, 2014 | By Laura Peralta-Schulte

It is not often that Sister Simone and Rep. Paul Ryan agree on policy issues. That is why NETWORK was thrilled to see that a core idea in Ryan’s recent Expanding Opportunity in America discussion draft was a call to dramatically expand the Earned Income Tax Credit (EITC) to include childless workers and workers between the ages of 21 and 64.

At the American Enterprise Institute unveiling of his anti-poverty proposal, Ryan credited the EITC as an idea inspired by the late economist Milton Friedman–or “Uncle Milton” as he affectionately called him–who proposed the merits of a “negative income tax” to provide assistance to low income Americans. At NETWORK, we believe that the EITC is a just, progressive tax policy where those who work and live on the edge of poverty pay less tax than those who can afford to pay more. Regardless of philosophical bent, economists across the spectrum believe that the EITC is one of the most effective anti-poverty programs in America and we strongly encourage all politicians–Republicans and Democrats–to move forward to enact this change that would lift millions out of poverty.

Much of Representative Ryan’s comments in the section related to the EITC argue that the EITC is a policy that should be enacted as an alternative to raising the minimum wage. We at NETWORK respectfully disagree with Rep. Ryan’s analysis and believe that expansion of the EITC coupled with an increase in the minimum wage is the most effective way to combat poverty.

Our advocacy is informed by the Catholic Church’s fundamental belief in just wages. Since 1891, the leaders of the Catholic faith have taught explicitly that:

“Before deciding whether wages are fair, many things have to be considered; but wealthy owners and all masters of labor should be mindful of this—that to exercise pressure upon the indigent and the destitute for the sake of gain, and to gather one's profit out of the need of another, is condemned by all laws, human and divine” (Pope Leo XIII, Rerum Novarum 20)

Pope Francis recently restated this sacred obligation by suggesting that a society that “does not pay a just wage,” that “only looks to its balance books, and that only seeks profit “is unjust and goes against God.” He further states in his papal exhortation, the Joy of the Gospel, “As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets…and by attacking the structural causes of inequality, no solution will be found” to lift people out of poverty.

Three million workers in the United States live in poverty despite working year-round, full-time jobs; one-third of families with children living in poverty include a full-time worker; and nearly 60% of families living at 200% of the federal poverty line—which includes a family of four trying to get by on less than $50,000 a year—have at least one member of the household working. Put another way, in 1968 the minimum wage was enough to keep a family of three out of poverty; into the early 1980s, the minimum wage was enough to keep a family of two out of poverty; but the minimum wage can no longer keep even a family of two above the poverty line.

One of the structural changes that needs to occur is for employers to pay their full-time workers a living wage or at least wages above the poverty line. The latter, in current dollars, is a rate of $10.10 an hour. Paying full-time employees poverty wages is unjust.

Contrary to Ryan’s analysis, there are many economic benefits to raising the minimum wage. An increase in wages increases demand in an economy that is in desperate need for it; an increase to $10.10 would raise wages for 28 million workers by $35 BILLION and two-thirds of those workers are women many of whom are sole breadwinners for their families. Further, data shows that states that have raised the minimum wage in 2014 have added more jobs than the states that didn’t.

In addition, in Ryan's "opportunity grants" described elsewhere, he forces people to set goals of getting a job that pays above the minimum wage. If Ryan recognizes that a minimum wage job does not lift someone out of poverty, wouldn't the easier solution just be to raise the wage? Without an increase, Ryan is only changing the WHO in who lives in poverty because minimum wage jobs will still need to be done; so really he would just be feeding new people into poverty as he lifts others out. The only thing to break that cycle is increasing the federal minimum wage.

If Ryan wants to save government funds, why isn’t he asking companies to pay their workers a living wage? We know that a significant portion of people receiving government assistance for food and other necessities actually work full-time, but don’t make enough to support themselves or their families. Is it fair that the average CEO of profitable companies make 933 times more than a minimum wage worker? We at NETWORK believe the time for structural change is now.

Finally, Representative Ryan proposes to pay for an increase in the EITC through three mechanisms: cutting social programs, cutting access to the Child Tax Credit (CTC) for low income, undocumented working families who pay their taxes through an IRS-issued Individual Tax Identification Number (ITIN) rather than a Social Security number, and by cutting “corporate welfare.” As we begin a dialogue on tackling issues of poverty, we suggest a good place to start is to agree to a simple guiding principle: any proposal to help lift people out of poverty should not be paid for by people living in poverty. In particular, we reject any call to deny CTC benefits to legal residents and undocumented workers who file their taxes using ITINs and who pay billions of dollars in taxes—payroll, Social Security and Medicare—and yet are not eligible for benefits. Cutting them off from the CTC will hurt up to 5.5 million children, 4.5 million of whom are U.S. citizens. These taxpaying families—like all families—deserve support and an opportunity to succeed.

We do believe, however, that Ryan’s proposal to cut corporate welfare, rather than the safety net, is the way to pay for these increased benefits to families living in poverty. In his presentation at AEI, Ryan specifically called for a cut in oil and gas subsidies. Here too NETWORK is in full agreement to close tax loopholes to wealthy corporations and individuals, in order to pay for programs to support the common good.

Representative Ryan, we welcome this important dialogue and hope to work with you to expand the EITC and, more generally, to promote programs in support of the 100%.