This guest blog is by Susannah Tahk , assistant professor of law at the University of Wisconsin-Madison. It is based on a terrific paper, the full text of which can be found here. You can follow her on twitter @susannahtahk
In recent years, the war on poverty has largely moved into the tax code. Provisions like the Earned Income Tax Credit, the Child Tax Credit, the Low-Income Housing Tax Credit and the education credits have begun to displace direct-spending programs like cash welfare and public housing.
This move has serious consequences for how the United States fights poverty. For one, the tax anti-poverty programs offer political and public-opinion advantages over their non-tax counterparts. People prefer tax programs to non-tax ones. In addition, tax anti-poverty programs come with less stigma than do traditional direct-spending programs. Also, the IRS is responsible for administrating the tax anti-poverty programs, and the IRS is a relatively low-cost, efficient administrator.
However, the tax anti-poverty programs also fail at fighting poverty in several ways. Many of the tax anti-poverty programs actually offer more valuable benefits to higher-income taxpayers than to the poor. Further, the tax anti-poverty programs do a terrible job at reaching individuals and families in deep poverty. In addition, many of the legal protections for recipients of direct-spending programs do not apply to the tax anti-poverty programs. Moreover, there are no formal evaluation processes of the tax anti-poverty programs in place to help us to understand how effective or ineffective these programs might be at combatting poverty. Finally, low-income taxpayers have trouble filing complicated tax returns to receive their benefits and then navigating the IRS’s administrative procedures if the benefits get denied. As a result, there is a desperate need for more legal assistance in the tax war on poverty.
The tax war on poverty could be more effective than it is currently. Making it that way will first require acknowledging that it exists.