Jamie Dimon, Chairman of the Board and Chief Executive Officer of JPMorgan Chase & Co, in his latest Letter to Shareholders calls for a big expansion of the federal Earned Income Tax Credit. He writes:
The gap between skilled and unskilled workers has been growing dramatically – so much so that unskilled labor has become less and less a “living wage.” Of the 150 million Americans working today, approximately 21 million are paid less than $15 per hour. It is hard to live on $15 an hour, particularly for families (even if two household members are working). But all jobs should be treated with respect. Jobs and living wages bring dignity, lead to more opportunity — in housing, education, childcare, health and overall well-being — and also help rebuild communities as that income is used to improve how people live.
A major step would be to expand the Earned Income Tax Credit (EITC), which many Democrats and Republicans already agree upon. Today, the EITC supplements low- to moderate-income working individuals and couples, particularly with children. For example, a single mother with two children earning $9 an hour (approximately $20,000 a year) could receive a tax credit of more than $6,000 at year’s end. Workers without children receive a very small tax credit – this should be dramatically expanded, too – and personally, I would eliminate the child requirement altogether. Last year, the EITC program cost the United States about $64 billion, and 31 million individuals received the credit. We should convert the EITC to make it more like a negative income payroll tax, paid monthly. Many people who are eligible for this benefit do not get it (often because they do not know about it). Proper reform of this program could increase benefits where deserved and reduce fraudulent and improper payments. Any tax credit income should not be offset by any other benefits these individuals already receive.
I have little doubt that this would do more than anything else to lift up lower-income neighborhoods as the money is spent on lifting up their families. I also have little doubt that this would add to GDP – because most of this money would, in fact, be spent.
We couldn’t have said it better! Our call for the state to expand its EITC match of the federal credit from six percent to sixty was based on:
- Dimon’s analysis that the U.S. economy has too many low-wage jobs structurally. No matter how strong the economy, there will always be lots of low wage jobs.
- That “It is hard to live on $15 an hour, particularly for families (even if two household members are working).”
- “But all jobs should be treated with respect.”
As we have written:
Nearly six in ten Michigan jobs pay less than what is required for a family of three to be middle class ($47,000). This two-tier economy is prevalent across all of Michigan and across all races and ethnicities. This two-tier economy is structural. A reality when the Michigan economy is expanding as well as when it is contracting. A reality when unemployment is low as well as when it is high. A reality when the stock market is booming as well as when it is collapsing.
This is the prime economic challenge of our times: having an economy that provides family-sustaining jobs––not just any job––so that all working Michigan households can raise a family and pass on a better opportunity to their children.
The pandemic made clear that low-wage workers live paycheck to paycheck not because they are irresponsibly buying “unnecessary” luxuries, but because they are in low-wage jobs that leave them struggling to pay for the necessities. The reality is that most of those struggling economically, in good times and bad, are hard-working Michiganders who, like us, get up every day and work hard to earn a living. What these lower-wage workers need most is income, not programs.
Expanding the federal EITC is much higher impact that state expansion. We should do both, but a federal expansion is what matters most. The way Dimon proposes to expand the federal credit is even more high impact. Creating a negative payroll tax. Low wagers workers would receive their credit on their paychecks, rather than once a year. Eligibility would be per worker, not per household and irrespective of the number of children in the household. The Dimon proposal would also greatly reduce the number of eligible workers that don’t receive the credit and greatly reduce payments to those not eligible for the credit.
All big steps towards “jobs and living wages bring dignity, lead to more opportunity — in housing, education, childcare, health and overall well-being — and also help rebuild communities as that income is used to improve how people live.”
In Michigan we built an unprecedented cross-sector, cross-ideology coalition to push for an expansion of the state match to 30 percent. Hopefully that same kind of cross-sector, cross-ideology coalition can be built nationally for the Jamie Dimon recommendations.