Earned income tax credit

Wage replenishment is a form of wage subsidy. In general, it refers to the " Earned Income Tax Credit ( EITC ) " (literally " earned income tax credit ") of the United States. Wage subsidies is also available in the UK, Ireland, USA, Canada, New Zealand, Finland, Belgium, France, the Netherlands and Denmark.

In the U.S., the EITC was adopted in 1975, and has since been adapted several times. Currently, the EITC is the largest poverty reduction program in the United States and finds broad support.

• 2.1 United Kingdom

• 6.1 sources

Structure of the EITC

Wage replenishment of the United States is based on a three-stage approach

• In the input stage provide declining income for an increasing percentage top-up,
• In the plateau stage, a maximum amount is paid, remain unchanged by other income,
• And then goes into a Ausklingstufe about about in the falls of the top-up.

In 2006, a family with two children has reached an entitlement to 40 % wage fill in their own earned income up to $ 10,750, the maximum amount of $ 4,400 is in the plateau region at an operating income to $ 15,000. After that, the top-up falls again and disappears altogether at a working income of $ 35,000. Married with joint income tax return get $ 2000 bonus for the decay. In families with one child, the percentage in the input stage of 34% and a maximum amount of $ 2,604 is. Without dependent family members wage population is 7.65% with a maximum rate of $ 380 which corresponds to the employee's share of the U.S. Social Security. The Auszahlbeträge subject to constant inflation adjustment.

In addition to the nationwide wage replenishment have decided an additional wage fill 11 states. These correspond structurally to the national EITC on a smaller scale - about 15 to 30 percent depending on the state - which are granted on income taxable wages. In addition, there are municipal programs for wage replenishment in New York City, in Montgomery County ( Maryland) and in San Francisco.

Do not call the EITC

The Federal Audit Office (GAO ) and the Internal Revenue Service (IRS ) indicate that 15 % apply for wage fill to 25 % of eligible households. This corresponds to about 3.5 to 7 million households that do not get billions of Auffüllbeträgen.

In 2002, the average salary was in filling U.S. EITC at $ 1,766 per family, with which the 15 % non- polling in about 6.65 billion U.S. dollars equivalent (almost 12 billion at 25 %).

Other countries

Among the states with wage replenishment include the UK, Ireland, USA, Canada, New Zealand, Finland, Belgium, France, the Netherlands and Denmark. In some cases, the maximum wage replenishment is low ( in Finland at 290 euros ), in other states of the U.S. are considerably exceeded the maximum amount (in the UK up to 6150 euros ).

In Canada ( labor income - tax bonus ) is similar to the "working income tax benefit" the British WFTC.

United Kingdom

In the United Kingdom, the " Working Tax Credit" ( WTC - literally working tax credit ) and the " Child Tax Credit" (CTC - literally child tax credit) is granted, the since the resolution of April 2003 the front of the existing combined "Working Families Tax credit " ( WFTC - literally working families tax credit ) replaces that existed from April 1999 to March 2003. This in turn was a transitional solution to the previously granted "Family Credit" (FC - literally family credit), which was adopted in 1986. WTC and CTC are calculated based on the annual income tax return. The numerical amount of the tax credit may exceed the income tax amount (negative income tax). In the WTC / CTC a base amount of different entitlements is calculated by the percentage of the labor income, a deduction is made - in the tax year 2006/2007 there were 1.620 pounds per household, £ 545 for parents and 1.690 pounds per child, which were 37% of labor income deducted. In the tax year 2008/2009 the rate was increased to 39%.

In the UK, 80 % of those eligible to take the wage replenishment after WTC / CTC to complete and about 5 % of total employment related funds from the tax credit.

Impact

Wage replenishment is the broadest form of poverty in the United States. Due to the structure relieves especially families with Least earners. This compares with only 30 % of those who work for minimum wage and legally live on the poverty line, in general, these are young people, students and childless housewives with additional income. In 2005, nearly 21 million families have received over 36 billion U.S. dollars from the EITC program. Wage replenishment has a significant impact on families and communities with Least earners, since in this way five million families are lifted above the poverty line nationwide. Since this limit is usually the limit for claims for subsistence on other state aid payments, accounting for other forms of aid for EITC - eligible salaried employees generally. Estimate economic experts that each extra dollar for low- and lower-income earners have a multiplier effect of 1.5 to 2 on the budget funds have actually consumed, which are available to the families and their communities. Under the conservative assumption causes every dollar of wage fill a demand increase of $ 1.5, which supports mainly the economic life of communities.

Research has shown that wage replenishment led to a significant increase in the level of employment, especially in poorly educated single mothers. On the other hand, there is evidence that the additional employment has led to a reduction in hourly wages among the beneficiaries.

Comparison

Compared with other state benefits there are in wage replenishment no incentive to rely solely on welfare without their own workload. The pressure to accommodate a low paid job comes here even without bureaucratic efforts from how it is consistent with the usual in Germany unemployment benefit II. The basis for the amount paid out requires no separate means test, but it occurs in the detection of rewarding taxable income (income from employment ). Within the general wage tax annual adjustment then real income of the year, the remitted by the employer tax and wage advance replenishments received are offset against each other.

On the other hand, a low-wage sector is created, both with the advantages as a location for production companies with jobs for low-skilled workers, as well as with the disadvantage of lowering the wages of other low-skilled workers, sometimes even below the level of social assistance. This effect has been consistently in the context of the Hartz IV laws in Germany - by the end of 2007, there were approximately 1.3 million recipients of supplemental unemployment benefit II ( supervisor Tocker ) to their low earnings, with which they are further treatment within the meaning of the SGB II (ie all additional revenues fully -reducing effect ).

In contrast, the wage replenishment provide a greater incentive for the expansion of work activity even at low recoverable hourly wages, since it amounts also acts beyond the limits of social assistance levels. This is particularly true for low-skilled single mothers who come to Germany by the additional social security contributions per child to a basic security that far exceed the recoverable income in the labor market. For a positive side effect heard that efforts to secure the inclusion of very small jobs ( for eligible wage filling to be ) the economic relationships will be strengthened, that as there is the main source for finding longer-term full employments here.

The cost of wages replenishment are manageable - the U.S. they move at about 30 billion euros and in the UK at 10 billion euros. With about 80 % utilization of the needy, the value is higher than in the local social welfare systems, for comparison only accept 60 % of the beneficiaries of social assistance in Austria true., So that the intention of helping low-income earners will be better met. A special feature is that the wage replenishment is calculated generally on the household income - for families with children and a low income, the pressure to take up employment for the second parent is significantly reduced.