If someone offered you tax-free money, you’d be crazy to turn it down. Uncle Sam is still in the business of handing out cash to taxpayers via the Earned Income Tax Credit (EIC). Despite the naysayers who claim the tax credit offers undeserving taxpayers a free ride, in reality the annual cash infusion more than pays for itself as it stimulates the economy.
In the state of Washington’s most populous county, the tax credit contributes more than $191 million back into the pockets of King County, Wash. residents with an average credit amount of $1,920 per return. Most economists agree a cash infusion has a multiplier effect that boosts a local economy. Multiply that on a larger scale and the EIC plays a significant role in spurring spending within America’s households. Although it does not create as big of an impact as the Christmas shopping season, it does increase the velocity of money and that juices the economy.
Dating to1959, “money has never moved through the U.S. economy at a more glacial pace than it has over the past year,” according to Matthew Phillips, a reporter for Bloomberg Business Week.
Even if the workings of the larger macro-economic environment in the U.S. are a bit mysterious to the average taxpayer, the American people know how to stimulate the economy. We love to shop down to the last man, woman and child. Spending that earned income credit isn’t just about boosting the larger economy, it’s also about adding some cheer to overburdened taxpayers who appreciate the relief it affords.
And that’s enough to cheer up any taxpayer!