What Warren Buffett Gets Wrong (and Right) About the EITC
May 29, 2015Print
Business magnate Warren Buffett, who is worth more than $72 billion, recently took to The Wall Street Journal’s opinion page to call for a “major, carefully crafted expansion” of the federal Earned Income Tax Credit (EITC) instead of an increase in the minimum wage. Research backs Buffett’s assertion that the credit is one of the best ways to reward work and encourage workers to improve their skills, but policy experts argue against his claim that an expanded EITC is a “better option” than higher wages for helping low-income workers. In fact, research shows that the two policy tools are most effective when strengthened in tandem.
Robert Greenstein, president of the Center on Budget and Policy Priorities, recently wrote that using the policy tools together maximizes potential benefits to working families in a variety of ways. While the EITC only goes to families once a year at tax time to assist with larger payments such as car repairs and medical bills, a higher minimum wage helps families with every paycheck to cover basic costs like food and rent. The EITC also takes into account the size of a recipient’s family, while the minimum wage does not. Increasing both means that everyone from a family of eight to a childless worker will receive some benefit from their hard work.
Buffett joins a number other prominent leaders in the business community in support of the EITC, but research shows that characterizing the credit as an alternative to higher wages for low-income workers will not provide the greatest benefit to those most in need. Instead, efforts to improve both policies are likely to produce the best results.