Report - Defrauding the American Taxpayer - The Earned Income Tax Credit

Ed Rubenstein, president of ESR Research and a former director of research at the Hudson Institute, explains in his recently updated report entitled Defrauding the American Taxpayer – The Earned Income Tax Credit and Illegal Immigration, that illegal aliens are among the chief beneficiaries of the $62.5 billion income transfer scheme known as the Earned Income Tax Credit (EITC).

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“In the report Rubenstein reveals that the IRS knowingly allows illegal aliens to defraud taxpayers by getting cash EITC payments of up to $5,750 for a family of five,” said The Contract. “The IRS also refuses to implement recommendations from its own Inspector General’s office that could stop massive EITC fraud that costs taxpayers as much as $13 billion a year.

“Rubenstein also shows how Congress has changed a federal kick-back program intended to supplement the earnings of low income workers, into one that subsidizes parenthood and disproportionately benefits immigrant families as opposed to those of native workers.”

Copies of this explosive seven-part report, Defrauding the American Taxpayer-The Earned Income Tax Credit and Illegal Immigration, are available at our website:

“On tax day 2009 we released a study of the Earned Income Tax Credit,” said Rubenstein. “At the time we noted that the credit had quietly become the largest cash transfer program for low-income families in the United States – dwarfing better known programs such as TANF (cash welfare.) Since then Federal spending has expanded far more rapidly than anyone had anticipated while tax revenues have shrunk. In FY2008 the U.S. budget deficit was $0.5 trillion; this year (FY2011) it is projected to be $1.6 trillion.

“Every spending program, every revenue source is on the table – or so we are told. Reductions in Medicare, Medicaid, and other “untouchable” social programs have been proposed. Yet the EITC is under the radar in this debate. Neither party has shown any interest in cutting the tax credit. The credit is not subject to the Congressional budget authorization process.

“One reason for its relative anonymity: EITC is part of the income tax code. The tax code is vast – it contains many different deductions, allowances and credits – of which the EITC is one of the most generous – and important.

“Ironically, the best hope for reducing EITC payments may be a government shutdown. At the earliest a shutdown could come a little over a week from this year’s April 18 deadline for individual tax returns. Policy observers say that while it is unlikely that a shutdown would prevent the government from collecting tax money, other IRS functions — including the delivery of billions in tax refunds — could be affected. The sheer scope of EITC recipients means a vast number of households could be impacted – at least temporarily – by a shutdown.

“Obviously, a temporary halt would not reduce the incentives to commit fraud and have out of wedlock children built into the EITC program.”

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