EITC: Good (Takes Money from Congress), or Bad (Hits Underground Economy)?
For several years now, I’ve been volunteering with the
VITA
program. In this program, the
IRS
trains volunteers like me — folks without any previous tax preparation
experience necessarily — to help low-income people file their tax returns.
I’ve been doing this because the majority of low-income tax filers qualify for
tax refunds. Many people who qualify for the Earned Income Tax Credit
(EITC),
for instance, fail to claim it because they do not file or they are too
confused by the instructions to claim the credit correctly.
My theory has been that by volunteering, I’ve been helping to siphon money out
of the hands of Congresscritters and into the hands of people who can spend it
more responsibly. But I’ve been nagged by the worry that by doing this, I’ve
been playing too close to the machine for comfort.
The Earned Income Tax Credit
(EITC)
provides financial assistance to low-income workers through a refundable tax
credit. The
EITC,
which has received strong bipartisan support
, now
represents the nation’s largest anti-poverty program for non-elderly
individuals. In this Note, I contend that the EITC’s
historical development failed to account for (and prior scholarly analysis
of its impact on labor supply decisions have ignored) the important role of
informal employment in the lives of the working poor. This Note presents the
first analysis of the financial impact of government transfer and tax
programs on the decision to report informal income — income that, were
it reported, would be otherwise legal. As the Note’s analysis reveals,
while drastic changes in both tax and transfer programs may be necessary to
provide financial incentives for many households with children to report
informal income, more targeted changes to the
EITC
could provide strong incentives for childless informal workers to report.
The Note argues that the benefits to both individuals and society, financial
and otherwise, of tax reporting by low-income individuals engaged in
informal work merits reconsideration of the EITC’s
overall structure and administration. Administrative and policy innovations
described in the Note are also necessary to maximize reporting compliance.
If people become motivated to leave the underground economy for the tax-aware
economy in pursuit of a refundable tax credit, which is probably already the
case, this may outweigh the benefits of removing money from immediate and
direct government control. I’m torn. It’s hard to quantify the cost/benefit
here. What do you think?
Anthony Benezet is
one of the giants of 18th century American
Quakerism, particularly well-known for his efforts towards the abolition of
slavery.
He was one of the signers of the
“epistle of tender love and caution”
that can be considered the founding document of American war tax resistance.
I’ve tried to find some additional information about Benezet’s attitudes
toward tax resistance, but have so far only been able to find a fragmentary
record that hints at more extensive writings that either no longer exist or
that I haven’t managed to locate yet. I found some good information in George
S. Brookes’s Friend Anthony
Benezet ().
From a letter to John Smith, :
Some time last week we understood a meeting was proposed by William Brown and
John Churchman [two other “epistle” signers] to be held with all those who
had refused to pay the Last Year’s Tax, to which we understood our English
Friends intended to attend; as this proposal begat some uneasiness in some of
us O.J. [“Very likely Owen Jones” — George
S. Brookes] and myself went up to William
Brown and told the Friends there that we must declare our disunity with said
meeting, and on our own and the behalf of many of our Friends who we were
assured could not approve of it as it will have a tendency to prejudice the
mind of many young people and induce them to come to hasty conclusions.
Howsoever we were told the time was too short to contradict the meeting,
which was held. Where after a pretty deal of conversation it was concluded
that the matter was now grown to such a height as to make it necessary to
carry it to the Yearly Meeting. The only matter in debate seemed how it
should be introduced there, which I understand to be concluded to be done by
the channel of the Meeting of Suffering, and as the matter will be probably
debated at that Meeting next Fifth day, thought it necessary to acquaint
ffd. of Burlington of it. I hope they will with me think it
their duty to attend. We are also to have a Meeting of Suffering next Seventh
day morning, before the meeting of ministers. I need not expatiate on the
matter as it speaks for itself: but remain in great haste as the boat is just
going.
We have professed to be called & redeemed from the spirit of the world,
from that prevalent pride & indulgence so contrary to the low, humble,
self-denying life of Christ & his immediate followers; but have we
indeed been such, has not our conformity to the world, our engagements of
life, in order to please ourselves & gain wealth, with little regard to
the danger to the better part, been productive to all the evils pointed out
in the Gospel, has it not naturally led us & begot a desire in our
children to live in conformity to other people; hence the sumptuousness of
our dwellings, our equipage, our dress; furniture & the luxury of our
tables have become a snare to us & a matter of offence to the thinking
part of mankind; and the mind has been raised in our children & often in
ourselves from the meekness & self-denial of the Gospel, into resentment
in defence of what is become as our Gods; and the meek humble & poor
self-denying life of Christ is become of no repute, or rather as a Shepherd
was to the Egyptians. The suffering providence which now is displayed over
us seems particularly calculated to bring us to our selves, in some
respects, as the trials & devastation is greater upon those whose
possessions are most expensive, & have been at the greatest pains &
expenses in adorning their pleasant pictures. I trust this, at least, will
teach us, in future, to live more agreeable to our profession; whereby our
wants being made less, the perplexing, dangerous snares & engagements
which attend the amassing & use of wealth would be much lessened. If
this afflictive providence does induce us to begin anew upon the true
foundation of our principles, in that low & humble state of mind &
conduct which becomes & indeed constitutes the real followers of Christ,
it will have done much for us.
In , French diplomat Gérard de Reyneval, who
was stationed in America, reported back to
his government on the troubles caused to the revolutionary war effort by
Quaker pacifism. He said he had interviewed Benezet and that Benezet “at last
declared, yielding to my arguments, that, agreeing with most of the
fraternity, he thought that the Quakers ought to submit to the actual
government and pay taxes, without questioning the use to which these might be
put; but that they had weak brethren among them, whose scruples they were
obliged to respect.”
Perhaps so, but I hear tell that there’s a
letter co-authored by Benezet and a “B. Mason” under the title “Some Brief
remarks offered as Reasons why we ought not to pay Taxes to support War.”
Alas, I haven’t yet been able to find a copy of this. (See
The Picket Line
for for the text of that
letter.)
I have to acknowledge the receipt of your several favors… except your
thoughts on the payments of taxes for war, which by some mistake I conclude
was left out in closing the packet.
As that is a subject much under the consideration of Friends [it] would have
been particularly satisfactory to have seen your thoughts upon it.
Inclosed I send a few of mine of that subject on the occasion therein
mentioned as they are the first I have communicated to any friend in
writing. If there be anything too strongly suggested I shall take it kindly
if you’ll note it, as I have a care on me that we do not, in
furthering this testimony which I have faith to believe is founded in the
truth, do anything to support it in a wrong zeal and not according to
knowledge.
As it is a step in the reformation that crosses a received testimony in
Society more than perhaps any other, we had need to step wisely in it.
The want of your thoughts on paying taxes has hitherto prevented my sending
Timothy Davis an account of your care and concern for him, hoping they would
before long come to hand. I have not seen him for some time but often hear
from him; he is doubtless too much in the love of, and conformity to the
world, and not enough the meekness and simplicity becoming his profession,
as, indeed is the case with too many others.
Our friend Abraham Griffith had a large opportunity with him and his
adherents who stand out against the body, please to be referred to him for
his state and that of the shattered meeting where he lives. He has been
writing against Friends under the character of vindicating of himself, with
which I was grieved and sent him word by his and my friend, who had seen his
performance, my prospects of such a procedure. He has not fit yet to publish
it.
Davis eventually did publish it, in , under
the title “An Address to the People called Quakers, concerning the manner in
which they treated Timothy Davis, for writing and publishing a Piece on
Taxation.” I haven’t seen this leaflet yet, but hope to get a peek at it
through interlibrary loan. (See The Picket Line
for ) One of these days maybe I’ll have a chance to scavenge
through the various Quaker archives back in Pennsylvania. Brown continues:
I have several times felt much for Timothy and longed for his restoration,
and though I have several times begun to write to him I have felt a cautious
fear, and though when I saw him while under dealing, the way to freedom
seemed open between us, yet it is not to write. Perhaps you may not be so
restrained. His letter to Abraham upon the subject of taxes shows him to be
in the reasoning.
Benezet wrote to George Dillwyn about Moses Brown’s letter (unmatched left-quote in the original):
What I mentioned to Sister Peggy was the desire I had to communicate parts
of Moses Brown’s letter relating to the payment of taxes for the
purposes of war. This testimony he appears fully convinced is founded on
truth, and sends me a copy of a letter he had purposed to send to friends in
England on that head, but at the same time he appears very desirous friends
should not do anything in a wrong zeal, not according to knowledge more
especially as he says it is a step in the reformation that crosses a
received testimony in society more than perhaps any other, we had need to
step wisely in it. He adds: “It is apprehended the many difficulties
friends were under at their first appearance and the manner of the English
collecting their taxes, being such that a refusal must have greatly encreased
them, the first reformers were excused from that burden, and permitted to pay
them, that by so doing they might (as George Fox said in an epistle on the
subject in ) better claim their liberty. The
trials (he further says) of those who may refuse the payments of taxes will
be increased at this time by their conduct being construed into a
disaffection to their country; and we hope will be a bar to any’s running in
a forward spirit to become reformers without feeling the meek & humbling
evidence of truth.
“we fear some take up the testimony more on account of the authority that
demands the taxes than because they are used for war”
Another letter to Benezet from Moses Brown, dated
, touches on Timothy Davis
again:
Having had a concern for some time for Timothy Davis I took an opportunity
with our friend John Lloyd and paid him a visit, and while there introduced
your concern for him and read your observations concerning him and his state,
which he seemed to take well, and said they would be of service if attended
to, and on the whole I believe Timothy sees he has missed it but can’t get
down enough to submit to the cross and acknowledge his mistake whereby he
might be reconciled to his brethren. He seems to think friends have been too
hard with him, but yet said he thought at times Friends were as near or
nearer than ever. He continues to have Meetings by himself and goes some in
the neighborhood round and preaches to his adherents. As to taxes, he told us
he expected one account that he could not pay, which I have since to mention
to others who have paid all, even some who had been on appointment to treat
with Timothy.
I think if he could be prevailed on to drop his Meetings at home and not go
abroad preaching to others he would very soon apply to be restored, which I
mention believing if you attend to your concern on his account it may be
useful to him. Your notes on taxes are satisfactory. We having for some time
an apology for those who refuse the payment of taxes, our meeting for
sufferings have of late appointed a committee to examine it, which has been
done, and alterations & additions made, and it has been proposed to send
it to your meeting for sufferings for your approbation before it is printed,
and I expect it will be forwarded soon after our next Meeting for Sufferings.
It is pretty extensive on the subject, containing near 60 quarto pages. Should
friends think it suitable at this time to publish it, I have thought it might
come in as an appendix although it has been written by one friend, diverse
others having assisted in collecting material and suggesting their prospects,
it is at present undetermined whether it will be best for one or more to sign
it, which occasioned the proposal of sending it to you. The subject is weighty
and should be well considered, those friends in our meeting who pay the taxes
of whom there are a number of concerned friends and leading members seem to be
much more cordially consenting to the publication than could be expected. The
principle difficulty with some of them and those of us who decline is we fear
some take up the testimony more on account of the authority that demands the
taxes than because they are used for war. Such we fear instead of forwarding
will eventually retard the testimony, and as some Friends refuse all taxes,
even those for civil uses as well as those clear for war and others that are
mixed, and thereby dropping our testimony of supporting civil government by
readily contributing thereto, it has been a fear whether this variety of
conduct won’t mar rather than promote the work. Could we be more united in the
ground of our testimony and in our practice in it, I should have more hopes of
its speedy obtaining in society. A time will doubtless come when a smaller
proportion will be for war than at present when the greater part being for
civil uses, friends may pay as there is and ought to be according to the
apostle, a conscientiousness in paying to the support of civil government as
well as refuse that for war, to refuse the payment of such when even a lesser
part be mixed for war before we applied to the authority to separate them
would not at present be my place, but probably before that time come when the
lesser part will be for war friends may be agreed to ask a separation which,
if it should be refused, we might be united in refusing even those the greater
part of which may be for civil uses.
I understand some Friends have fallen in with or been overpowered by the
common argument that civil government is upheld by the sword, and therefore
they decline paying to its support, which appears to me a great weakness,
for I see a material distinction between civil government and military, or a
state of war, and on this distinction our ancient testimonies was and remain
to be supportable of paying tribute & customs for the support of the
civil, and yet to refuse to pay trophy money and other expenses solely for
war. Civil government is in the restoring & supporting power, yet there
is a separation, as of the precious from the vile, in respect of this
subject, through the lusts and fallen ages under the specious claim of being
the disciples and followers of the Prince of Peace, have greatly contributed
to cloud and obscure it.
The thoughts on paying taxes of Samuel Allinson is well thought of even by
those who yet pay them, and as he has got diverse arguments not in the piece
now sent to the clerk of your Meeting for Sufferings, I have suggested to him
if Friends with you should agree to the publication of anything, I thought
some Friend might, out of them all, make the apology much more complete,
which I could wish as done in preference to publishing this now sent.
On , Benezet wrote to Robert
Pleasants, saying:
The consistency of paying tax for war is becoming so interesting a subject
to the Society that I trust it will be agreeable to you to see some note
which we have made on that weighty subject and which by a copy or other I
request you will communicate to our dear Friend Edward Stabler with whom we
much sympathize in the loss of his dear companion; but cannot write to him
as I could wish, I have not even time to read over the copy so that you must
help omission we have a care that is furthering this testimony which we have
faith to believe is founded on truth not to do any thing to forward or
support it in a wrong zeal and not according to knowledge. As it is a step
in the reformation that so directly crosses a received testimony in Society
more than any other we had need to step carefully and wisely in it. He that
believes makes not haste.
And that’s the last word I’ve been able to uncover. Benezet died in
. Timothy Davis rejoined the orthodox Meeting
in . It seems from these excerpts that a
number of war tax resisting Quakers were working to assemble a major argument
or statement of doctrine on the subject that could be published by the Society
under the imprimatur of their Meeting — probably incorporating Allinson’s work.
I haven’t been able to find any drafts of this, though, if any exist.
