Warren Buffet Calls for Expanding EITC: Tax Administration Impact Highlights There is No Free Lunch

One of the hot button political issues of the day is income inequality. The stagnation of low-income workers wages has focused attention on policies to offset that, such as possibly raising the minimum wage or boosting tax benefits. Last week, Warren Buffet in an Op-Ed piece in the Wall Street Journal chimed in, first situating inequality in today’s economy:

That mismatch is neither the fault of the market system nor the fault of the disadvantaged individuals. It is simply a consequence of an economic engine that constantly requires more high-order talents while reducing the need for commodity-like tasks.

He then offers his views that it is a better approach to inequality is to increase the EITC rather than boost the minimum wage:

The better answer is a major and carefully crafted expansion of the Earned Income Tax Credit (EITC), which currently goes to millions of low-income workers. Payments to eligible workers diminish as their earnings increase. But there is no disincentive effect: A gain in wages always produces a gain in overall income. The process is simple: You file a tax return, and the government sends you a check.

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