Tuesday, July 11, 2006

Why Is the Earned Income Tax Credit Such a Well Kept Secret?

The movement to raise minimum wage laws in the United States remains very newsworthy, and yet it is an issue that remains steeped in ignorance. On the one side are the vast majority of economists and libertarians who oppose minimum wage laws on general principle. On the other extreme are liberals who argue that people who work full time at minimum wage should not be living in poverty. Those who oppose minimum wage laws are characterized as greedy by their opposition, and those who favor them are characterized as misguided. Almost entirely missing from this ongoing debate is any mention of the Earned Income Tax Credit (EITC).

I recently performed a Google Web Search for "minimum wage" (in quotes), and my query returned no less than 29,400,00 search results. When I added the search term "EITC" (without quotes) to my query, it returned 126,000 search results; when I replaced the search term "EITC" with "earned income tax credit" (with the quotes), it returned 231,000 search results. On its own, "EITC" returned 1,060,000 search results, whereas "Earned Income Tax Credit" returned 1,740,000 search results, and there is apparently an overlap of about 383,000 search results for "EITC" and "Earned Income Tax Credit."

Using these numbers as a rough estimate, less than one percent of the people who are talking about raising the minimum wage are discussing the alternative of the EITC, and less than four percent of the people who discuss the EITC mention it as an alternative to the minimum wage. The numbers are even more stark for Google News Search and Google Blog Search. And when I ventured into the blogosphere to ask high profile bloggers how they would respond to the position that an expansion of the EITC would be a much more effective and equitable way of helping the working poor than raising the minimum wage, most of them had never even heard of the EITC. Quite a few of them contacted me by private e-mail to ask me to provide them with more information before they responded publicly.

This ignorance is not limited to the blogosphere. In fact, even among the most well-informed and well-educated scholars, the EITC remains a well-kept secret. To wit, according to Dr. Andrew Leigh of the Australian National University, "While Econlit contains over 2000 articles and books on minimum wages, and over 150 on Earned Income Tax Credits (EITCs), only 20 articles or books deal with the two topics together." This is where the problem begins and ends, as few people take the time to perform independent research on a topic. Even the most well-informed and well-educated person prefers to rely upon experts.

If you have a serious tax delinquency you may want to enlist the services of a tax attorney. Or if you are starting up talk to a Business lawyer to make sure you have a solid accounting system in place.

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