The Earned Income Tax Credit: Encouraging Work and Rewarding Illegal Immigration

By Jerry Kammer on April 9, 2015

In his Wednesday appearance on C-SPAN's Washington Journal, Marc Rosenblum of the Migration Policy Institute encountered callers who didn't share his enthusiasm for the idea of providing the Earned Income Tax Credit to millions of persons who are now in the country illegally. President Obama's executive action, which is now under challenge in federal court, would allow them access to Social Security Cards, authorized employment, and for many, a chance to tap the EITC. That's why critics hoot that it would be the "amnesty bonus."

Rosenblum noted that the EITC, which Congress enacted in 1975, is "designed to encourage low-income people to work and incentivize formal employment."

That much is undisputed.

But some of his other comments were very much in dispute, including his description of the EITC as "a refund to low-income people to pay back some of their income tax." Equally disputed was his claim that under "comprehensive immigration reform," newly legalized immigrants would be paying more taxes than they did as unauthorized immigrants.

That is where the C-SPAN callers took exception. Their argument was that while immigrants might be paying more types of taxes, their net contribution to the federal treasury would actually be far less. As a caller from Longview, Texas, put it: "If someone is illegal and you make them legal and you say they're going to pay more taxes...their [EITC] refund is going to be way greater – you know, five, and six, seven times greater – than the amount of taxes they pay."

Another Texas caller put his taxpayer's discontent in a broader frame. He was upset about the benefits provided to families through their U.S. - born children: "They do get the welfare stamps – the food stamps," said the caller. "They get reduced rent. They get all these things free while American citizens are out there working their tails off, and we're paying for all of it."

The caller did not mention other anti-poverty programs that provide benefits through U.S.-born children, such as free school lunch, the WIC program, and Temporary Assistance to Needy Children.

Now, it's important to note that the families receiving these benefits do not receive anything that is not available to Americans who meet the income criteria. But it is also fair to point out that the costs of these benefits are seldom mentioned by those who say that "comprehensive immigration reform" as a means of restoring the nation's fiscal health.

Meanwhile, they are frequently raised in public arenas like C-SPAN, where many callers express disillusionment with the federal government.

The EITC alone carries enormous costs. Here is how conservative commentator David Frum, writing late last year for The Atlantic, summarized a Center for Immigration Studies analysis of how the EITC would distribute its largesse:

About 14.5 percent of the native-born population of the United States earns little enough to qualify for the EITC. Almost twice as great a portion of the total immigrant population, 29.7 percent, qualifies. But the specific immigrant groups most likely to benefit from the president's action earn even less. Fifty-three percent of Mexican-born immigrants, 55 percent of Honduran-born immigrants, and 57 percent of Guatemalan-born immigrants earn little enough to qualify for the EITC. About half the migrants from these communities in the United States are present illegally, and they dominate the numbers among the newly legalized... Everything points to a huge surge in EITC eligibility following this year's executive action.

President Reagan described the EITC as "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress." One has to wonder if the EITC could become another financial magnet, another powerful draw for people living in impoverished homelands where the idea of a social safety net –including a cash payout from the government for taking a low-paying job – would be an impossible dream. Only in America.