The Federal earned income tax credit gives money to low-income workers, to compensate them for payroll taxes. Since there was already a payroll tax cut in an earlier stimulus plan, why not just boost the Federal earned income tax credit?

There are a few reasons the earned income tax credit hasn’t been expanded:

• It isn’t targeted. The earned income tax credit doesn’t necessarily help build new infrastructure, boost home prices, or send people back to school. It may go straight into savings, which is not something stimulus plans generally try to do.
• It helps people who are still employed. With the unemployment rate likely to hit 10%, fewer and fewer people will be eligible for a tax credit that pays back payroll taxes. Instead of giving more money to people who are still working, the current stimulus plan tries to do two things: create new jobs, and reduce competition for existing jobs by sending people back to school.
• It’s harder to notice. A one-time credit giving back money that was already paid into the tax system is hard to notice. It sounds like an accounting gimmick, not a benefit (and maybe it is). But, for good reasons or for bad, it’s easier to notice having extra money if it shows up in a roundabout way, so the federal earned income tax credit doesn’t get as much attention.

The good news? The Federal earned income tax credit is one of the most common tax credits available to filers. Find out if you’re eligible!