Ideas From The Right: Economist Glenn Hubbard on Reducing Income Inequality through the EITC

This issue is the latest in our commentary series, “Ideas From The Right: Conservative Approaches to Tax Credits for Working Families.” For this interview, we sat down with economist Glenn Hubbard, dean of Columbia Business School and former Chairman of the Council of Economic Advisers under the Bush administration. Mr. Hubbard’s responses have been edited for brevity.

GlennHubbardYou’ve written on several occasions about using tax reform to reduce income inequality. Why do you think the tax code is the best vehicle for this endeavor?

I think the real issue in combating income inequality is to empower people toward work. A lot of people left the labor force as a result of the financial crisis, and monetary policy alone really isn’t going to bring those people back. It’s a structural problem, and we could assist it by providing direct support for work through the tax code.

You propose expanding the Earned Income Tax Credit (EITC) for childless workers as one way to tackle income inequality through the tax code. Why the focus on this credit in particular?

The EITC is already part of the tax code. The EITC started out as a method of providing direct support for work, but it has become more of a family support program. While it definitely makes sense to support families, we need to also strengthen the credit for single workers if we want to do more to encourage work.

How would you suggest funding an expanded EITC for childless workers?

I think it would have to be part of an overall tax reform package. Unfortunately, I don’t think the Obama administration is serious enough about tax reform to consider including an EITC increase in such a package.

Do you think the push is more serious on the Republican side?

On the House side, Paul Ryan has been eloquent in his support. On the Senate side, Marco Rubio has very interesting ideas. But to have any kind of tax reform, you need to have leadership from the Administration.

How has the conservative approach to the EITC evolved since your time as Chairman of the Council of Economic Advisers under the Bush administration?

I think more people on the Republican side have started to realize the importance of encouraging and maintaining work. That’s always been something that I’ve felt is important, but I think now there’s a lot more emphasis on reforming programs—like the EITC—that encourage work.

What messages around the economic impact of the EITC resonate well with conservatives?

I think there are two messages that resonate well. One is defensive: the EITC is a good answer when the (much less good) idea of increasing the minimum wage comes up. If we, as taxpayers, believe that low-wage workers deserve a higher income, then we should all pay to make that happen. The burden shouldn’t be shifted to employers.

The second message is affirmative: that the EITC truly is our best option for supporting work.