8 Million Adults Could Be Driven into Poverty — Because They Have Jobs

As  we enter another tax season, an estimated eight million low-income single adults without children are about to be hammered deeper into poverty by a federal tax system just as they’re digging their way out..

While federal tax laws generally are designed to protect poor families from falling below the federal poverty level by income and payroll taxes, that’s not so for millions of childless adults. For years, they have been largely excluded from the federal Earned Income Tax Credit, an anti-poverty program designed to offset the income and payroll taxes of struggling low-income workers and their families.

Currently, the law sets standard deductions and personal exemptions at levels that guarantee families with children or low-income seniors collecting Social Security aren’t obliged to pay any taxes unless their earnings exceed the federal poverty level. Also, working-poor families with children can qualify for both an EITC and Child Tax Credit that – when taken together – offset their payroll tax liability and  supplement their income.

But for a 25-year-old unmarried woman who earns poverty-line wages of $12,494 a year working 35 hours a week as a retail clerk, for example, there’s no such protection. While she is likely this year to owe the Internal Revenue Service a total of $1,170 in income taxes and payroll taxes, she will only be eligible for a small EITC of just $184, according to the study by the liberal Center on Budget and Policy Priorities.

“In short, federal taxes will drive this woman making poverty-level wages $986 into poverty,” the study asserts.

The report suggests that fine-tuning the EITC to address this group would address a patently unfair element of the federal tax code and draw broad support within Congress. “The principle that we shouldn’t tax people into poverty resonates across the political spectrum,” the report states.

Indeed, the need to do something to correct the problem is one of the few things on which President Obama and House Speaker Paul Ryan (R-WI) strongly agree. - Read More at thefiscaltimes

8 Million Adults Could Be Driven into Poverty — Because They Have Jobs