Wage replenishment
Wage replenishment is a form of wage subsidy . As a rule, this means the "Earned Income Tax Credit (EITC)" (literally "Labor Income Tax Credit " ) of the USA. Wage subsidies are also available in the UK, Ireland, USA, Canada, New Zealand, Finland, Belgium, France, the Netherlands and Denmark.
In the USA, the EITC was adopted in 1975 and has since been adapted several times. The EITC is currently the largest poverty reduction program in the United States and has broad support there.
Structure of the EITC
United States wage replenishment is based on a three-tier approach
- In the entrance level, falling income ensures an increasing percentage top-up amount,
- In the plateau level, a maximum amount is paid that remains unchanged by further income,
- and then goes into a decay stage above, in which the top-up amount drops.
In 2006, a family with two children is entitled to 40% wage supplementation with an income of up to USD 10,750, the maximum amount of USD 4,400 is reached in the plateau area with an income of up to USD 15,000. After that, the top-up amount will decrease again and will be waived altogether if you have earned an income of 35,000 USD. Married couples with joint income tax returns receive a surcharge of USD 2,000 for the final phase. For families with one child, the entry level percentage is 34% with a maximum of $ 2604. Without dependent family members, wage replenishment is 7.65% with a maximum rate of $ 380, which is the employee's share of US Social Security . The amounts paid out are subject to constant inflation adjustment.
| Income (x) | EITC level | Credit for 2 and more children |
|---|---|---|
| $ 0- $ 11,790 | Entry level | 40% * x |
| $ 11,791- $ 15,399 | Plateau level | $ 4,716 |
| $ 15,400- $ 37,782 | Decay level | $ 4,716 - 21.06% * (x - $ 15,399) |
| > = $ 37,783 | no claim | $ 0 |
| Income (x) | step | Credit for 1 child |
| $ 0- $ 8,391 | Entry level | 34% * x |
| $ 8,392- $ 15,399 | Plateau level | $ 2,853 |
| $ 15,400- $ 33,240 | Decay level | $ 2,853 - 15.98% * (x - $ 15,399) |
| > = $ 33,241 | no claim | $ 0 |
| Income (x) | step | Credit without children |
| $ 0- $ 5,595 | Entry level | 7.65% * x |
| $ 5,596- $ 6,999 | Plateau level | $ 428 |
| $ 7,000- $ 12,589 | Decay level | $ 428 - 7.65% * (x - $ 6,999) |
| > = $ 12,590 | no claim | $ 0 |
In addition to nationwide wage replenishment, 11 states have adopted additional wage replenishment. These correspond structurally to the national EITC on a smaller scale - around 15 to 30 percent depending on the state - which are granted on wages subject to income tax. In addition, there are community replenishment programs in New York City, Montgomery County, Maryland, and San Francisco.
Failure to get the EITC
The German Federal Audit Office ( GAO ) and the Federal Tax Service ( IRS ) point out that 15% to 25% of eligible households do not apply for wage replenishment. This corresponds to around 3.5 to 7 million households that do not call up billions of replenishment amounts.
In 2002, the average wage replenishment in the US EITC was $ 1766 per family, making the 15% underclaim roughly equivalent to $ 6.65 billion (nearly 12 billion at 25%).
Other countries
Countries with wage replenishment include Great Britain, 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 the US maximum is significantly exceeded (in Great Britain up to 6150 euros).
In Canada, the working income tax benefit is similar to the UK WFTC.
United Kingdom
In the UK , the Working Tax Credit (WTC) and Child Tax Credit (CTC) are solidarity activating grants for low-income employment. Since the resolution of April 2003, WTC and CTC have replaced the previously existing combined "Working Families Tax Credit" (WFTC - literally working families tax credit), which existed from April 1999 to March 2003. This in turn was an interim solution for the "Family Credit" (FC - literally family credit ) granted before , which was decided in 1986. WTC and CTC are calculated based on the annual income tax return. The payment amount of the tax credit can exceed the income tax amount (negative income tax). However, a prerequisite for the WTC is a minimum number of paid working hours. In the WTC / CTC, a base amount is calculated from various entitlements, from which a percentage is deducted from earned income - in the 2006/2007 tax year there was £ 1,620 per household, £ 545 for parents and £ 1,690 per child, of which 37% were earned deducted. In the 2008/2009 tax year, the rate was increased to 39%.
In the UK, 80% of those eligible took WTC / CTC wage replenishment in 2007, and around 5% of all employed people received funds from the tax credit.
The CTC is no longer granted for children born on or after April 6, 2017 whose families already have two children. Exceptions apply to foster children, multiple siblings, adopted children and children who have been raped. The family component of the CTC ( family element of child tax credit ) has been canceled and, as a transitional measure, will only continue to be paid to those families who had a child on April 6, 2017.
impact
Wage replenishment is the broadest form of poverty reduction in the United States. Due to the structure, it particularly relieves families with the lowest incomes. This contrasts with only 30% of those who work at the statutory minimum wage and live on the poverty line, as a rule these are young people, students and childless housewives with additional income. In 2005, nearly 21 million families received more than $ 36 billion from the EITC program. The wage replenishment has a significant impact on families and communities with the lowest earners, as 5 million families are raised above the nationwide poverty line in this way. Since this limit to the subsistence level is usually also the limit for claims to other state aid payments, other forms of subsidy are generally not required for EITC-eligible wage earners. Economists estimate that every extra dollar for low-income and low-income earners has a multiplier effect of 1.5 to 2 on the actual household money available to families and their communities. Under the most conservative assumption, every dollar of wage replenishment leads to an increase in demand of 1.5 dollars, which primarily supports the economic life of the municipalities.
Research has shown that wage replenishment resulted in a significant increase in employment levels , particularly among poorly educated single mothers. On the other hand, there are indications that the additional employment has led to a reduction in hourly wages for the beneficiaries.
comparison
Compared to other state transfer benefits, there is no incentive for wage replenishment to rely on social assistance alone without having to work. The pressure to take up a low-paid job even gets by without bureaucratic efforts, as is common in Germany with unemployment benefit II. The assessment basis for the amount of the payment does not require a separate means test, but takes place when the income subject to wage tax is recorded (income from employment). As part of the general annual wage tax adjustment, the actual income for the year, the taxes paid by the employer and the wage replenishments received in advance are offset against each other.
On the other hand, a low-wage sector is being created, both with the advantages of being a location for production companies with jobs for unskilled workers, and with the disadvantage of lowering the wage level of other low-skilled workers, sometimes even below the level of social assistance. This effect is already common within the framework of the Hartz IV laws in Germany - at the end of 2007 there were around 1.3 million recipients of supplementary unemployment benefit II ( top-up ) in addition to their low earned income, with which they are still needy within the meaning of SGB II (So all additional income has a fully reducing effect).
In contrast, wage replenishment offers a greater incentive to expand work even with low achievable hourly wages, as it also has an effect beyond the limit of the social assistance level. This applies in particular to underqualified single mothers who, through additional social security contributions per child, receive basic security in Germany that is far above the income that can be achieved on the labor market. A positive side effect is that the effort to take on very small jobs (in order to be eligible for wage replenishment) strengthens the economic network of relationships that is the main source of long-term, full-fledged employment here and there.
The cost of wage replenishment is manageable - it is around 30 billion euros in the US and around 10 billion euros in the UK. With around 80% use of the needy, the value is higher than in local social assistance systems, in comparison only 40% of those entitled in Austria receive social assistance, which better fulfills the intention of helping low-wage earners. A special feature is that the wage replenishment is usually calculated on the household income - in the case of families with children and a low-wage earner, the pressure to take up employment for the second parent is significantly reduced.
See also
Web links
- "The 'Earned Income Tax Credit' is intended to alleviate poverty at work" (pdf) , IAB Brief Report No. 12/1999, Federal Labor Office, September 3, 1999, ISSN 0942-167X (211 kB)
- "Earned Income Credit (For use in preparing 2005 returns)" (pdf; 1.2 MB) , Publication 596 (English), Treasurer, Federal Tax Service ( IRS ) of the USA - Guide to applying for US wage replenishment (2005 annual income tax adjustment), with a tabular appendix
- "The Earned Income Tax Credit (EITC): Percentage of Total Tax Returns and Credit Amount by State" (pdf) , Report No .: RS22316 (English), Congressional Research Service Reports, November 4, 2005 - Report of the US Congress on wage replenishment actually paid, broken down by state
swell
- ↑ Figures cited are from EITC Parameters 2002-2007 ( Memento of the original of July 13, 2007 in the Internet Archive ) Info: The archive link has been inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. , at the Tax Policy Center (Accessed January 26, 2007)
- ↑ Working Tax Credit. gov.uk, accessed October 3, 2017 .
- ↑ a b c d "Tax credits: EITC, WTC, CTC" ( Memento of the original from April 19, 2012 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF; 79 kB), Bernd Martin, Der Standard , Vienna, July 12, 2007
- ^ Child Tax Credit: exceptions to the 2 child limit. gov.uk, April 6, 2017, accessed October 3, 2017 .
- ↑ "The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency (Does the Minimum Wage Help or Hurt Low-Wage Workers?)" (Pdf) , Mark D. Turner, Secretariat for Planning and Evaluation (ASPE), Department of Health (HHS), USA 1999
- ↑ "Who Benefits from the Earned Income Tax Credit? Incidence Among Recipients, Coworkers and Firms (pdf; 493 kB) ( Memento of the original from June 20, 2006 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check original and archive link according to instructions , then remove this note. , Andrew Leigh, Business School, Social Science Research Institute, Australian National University , July 2003 - November 2004
- ↑ Spiegel-Online: "1.3 million employees also receive Hartz IV"
- ↑ "Humane living and working" (pdf) ( Memento of the original from June 15, 2006 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. , Franz Müntefering, Federal Minister for Labor and Social Affairs, speech for the Federal Congress of the SPD, Kassel, April 2006 - Quote: "We now have 300,000" toppers "- actually there are 900,000, but the others are part-time employees - who work full time and then end of the month have so little that they have to get supplementary unemployment benefit II - it used to be called “supplementary social assistance.” Incidentally, there are also 160,000 to 170,000 employees in Germany who get so little unemployment benefit I that they get supplementary unemployment benefit II shows that those workers who fall under Unemployment Benefit I have had wages that are very low. "
