Page 25 - ARUBA TODAY

BUSINESS Tuesday 21 February 2017
A25

Liz Weston:
How to put more in working-class pockets

LIZ WESTON that the credit, while help- of earners since 1979.
NerdWallet ful, has been no match for Because the credit rises
The American working class the income and wealth along with wages until
lost a shocking amount of losses workers suffered as reaching a plateau and
wealth in recent decades globalization and technol- phasing out, expanding
as wages stagnated. De- ogy wipe out better-pay- it enough to restore the
spite campaign promises,
making up that lost ground
will be no easy feat.
Creating more well-paying
jobs would help, but that
could take years.
Tax cuts could mean big-
ger paychecks for higher
earners but won’t imme-
diately help the many
working people who don’t
pay federal income taxes
— people in the bottom
40 percent of incomes re-
ceive more back from the
federal income tax system
on average than they pay
in , thanks to tax credits. This photo shows Liz Weston, a columnist for personal finance
Expanding those credits, website NerdWallet.com.
on the other hand, quickly (Dylan Entelis/NerdWallet via AP)
could make a real differ-
ence in people’s lives and ing manufacturing jobs. income of the bottom 20
help return some of the The working class — de- percent would also re-
income that’s been sacri- fined as households earn- place about half the in-
ficed to changing econo- ing between $23,300 and come lost by the next 20
mies and technology. $40,500 in 2013 — lost more percent of earners, Marr
Specifically, we could fol- than half of its wealth be- says. Marr offers examples
low President Ronald Rea- tween 1998 and 2013 , ac- of how it could work:
gan’s lead and increase cording to Federal Reserve -A single parent with one
the Earned Income Tax statistics. The whopping child and $16,000 in in-
Credit . 52.7 percent drop in this come currently pays
group’s median net worth $1,224 in payroll taxes (pri-
SUPPORT FROM BOTH SIDES compares with a 19.1 per- marily for Social Security
A quick history: The credit, cent drop for middle in- and Medicare) and zero
created in 1975 to help come households and a federal income taxes.
lower-income workers off- 20.7 percent decline over- Under expansion, his
set Social Security taxes, all. earned income credit
was greatly expanded un- Working-class debt lev- would increase by $3,103
der Reagan, who champi- els rose 47.9 percent dur- to $6,476.
oned it as a way to reduce ing this period while their fi- -A married couple with two
poverty while making work nancial assets — primarily children and $32,000 in in-
more attractive than wel- money in bank and retire- come currently pay $2,768
fare. Because the credit ment accounts — shriveled in income and payroll tax-
is refundable, low- and by 56 percent. The wealth es. Their earned income
moderate-income work- loss started long before the credit would increase by
ing people can get money latest recession and con- $5,126 to $8,953.
back from the government tinued afterward. -For a family of four, the
in the form of a refund credit would not phase out
even if their tax liability is THE COST OF MAKING until the household earned
zero. WORK PAY AGAIN nearly $70,000.
The credit continues to Helping workers restore A trillion dollars is a lot.
have broad bipartisan sup- this lost ground won’t be But President Trump’s pro-
port. Last year both Presi- cheap, of course. Neil Ir- posed tax cuts, which
dent Obama and House win, senior economics cor- would primarily benefit
Speaker Paul D. Ryan (R- respondent for the New corporations and wealthier
Wis.) proposed expanding York Times, has reported people, would reduce fed-
the credit for low-income that it would cost about eral revenue by $4.4 trillion
workers without children. $1 trillion over the next de- to $5.9 trillion over 10 years,
“There’s agreement on cade. according to Tax Founda-
both sides of the aisle that Irwin asked the Tax Policy tion estimates .
this (increasing the credit) is Center and the Center Expanding the credit
a reasonable thing to do,” on Budget and Policy Pri- would be one way to as-
says Roberton Williams, se- orities to figure the cost of sure that working people,
nior fellow at the Tax Policy expanding the credit to and not just the well off,
Center . replace all the income lost have a path toward creat-
Lawmakers understand by the bottom 20 percent ing more wealth.q