The idea of the Earned Income tax Credit, giving people who have low-income jobs a bit of a tax break, has been around for a while. In 1975, a Michigan Republican, Gerald Ford, signed the first federal credit into law while he was president. Since then, the federal credit has been expanded by subsequent presidents, including Ronald Reagan. President Reagan had high praise for it as part of the Tax Reform Act of 1986:
“It’s also the best anti-poverty bill, the best pro-family measure, and the best job creation program ever to come out of the Congress of the United States.”
The Earned Income Tax Credit was popular because gave people an incentive to get off welfare and go to work. Prior to the credit, a person on welfare would find it paid more to stay on public assistance because by the time taxes were taken out of the paycheck, they were worse off financially.
Alex Rosaen is a Consultant with the Anderson Economic Group. He’s written on the issue:
"The original kind of revolutionary idea with the Earned Income Tax Credit as opposed to simply providing families with direct cash aid was that it flipped things upside down; it got the incentives right instead of getting them wrong.”
So, that federal credit became a basic building block of the welfare-to-work effort.
www.michiganradionews.org/post/michigan-legislature-considers-tax-increase-working-poor
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