The Tax Credit Trap

Fight disinformation. Get a daily recap of the facts that matter. Sign up for the free Mother Jones newsletter.


Tax fraud by the poor amounts to some $9 billion a year. Corporations and the very wealthy, meanwhile, manage to avoid taxes to the tune of some $340 billion a year.

Nevertheless, the IRS spends a disproportionate amount of time and resources hunting down the former set of taxpayers—partly because they don’t have high-priced lawyers to argue their case, and partly because it’s just easier to determine fraud for the former group. A person claiming undue credits under the EITC isn’t going to be resorting to fancy loopholes or ultra-complex financial schemes. In fact, the agency was recently found freezing tax refunds for hundreds of thousands of poor Americans deemed “fraudulent”—most of whom were owed all of the money they claimed.

But here’s the thing. Part of the problem with low-income tax credits is that they’re unreasonably complex, as Dorothy Brown pointed out in the New York Times yesterday. The EITC’s instruction book runs to 50 pages, and even seasoned tax preparers often make mistakes calculating it. Nevertheless, low-income families are supposed to have this stuff down cold—and if they don’t, they risk being labeled “fraudulent” and persecution by the IRS. (Another problem, Brown might’ve noted, is that a whopping 40 percent of low-income taxpayers have never even heard of the EITC.)

As Brown says, the entire system is perverse, and instead of wasting money prosecuting low-income workers, Congress could simplify the tax credit and spend its time going after the corporations robbing the country of $340 billion a year—an amount, keep in mind, that could essentially close the federal budget deficit. Not that the Republicans in Congress are planning anything of the sort, but still.

HERE ARE THE FACTS:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

payment methods

ONE MORE QUICK THING:

Our fall fundraising drive is off to a rough start, and we very much need to raise $250,000 in the next couple of weeks. If you value the journalism you get from Mother Jones, please help us do it with a donation today.

As we wrote over the summer, traffic has been down at Mother Jones and a lot of sites with many people thinking news is less important now that Donald Trump is no longer president. But if you're reading this, you're not one of those people, and we're hoping we can rally support from folks like you who really get why our reporting matters right now. And that's how it's always worked: For 45 years now, a relatively small group of readers (compared to everyone we reach) who pitch in from time to time has allowed Mother Jones to do the type of journalism the moment demands and keep it free for everyone else.

Please pitch in with a donation during our fall fundraising drive if you can. We can't afford to come up short, and there's still a long way to go by November 5.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate