Berkshire Hathaway Inc. Chairman and CEO Warren Buffett advocated for an increase in access to the Earned Income Tax Credit (EITC) as a solution to support working-class families, saying the affluent are not responsible for the economic divide. 

“No conspiracy lies behind this depressing fact: The poor are most definitely not poor because the rich are rich,” he wrote in a 2015 Wall Street Journal opinion piece.

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He acknowledged the contributions of industry innovators like Henry Ford and Steve Jobs, arguing that their achievements have significantly benefited society at large. However, he pointed to an “inevitable consequence” of an advanced market-based economy as the root cause of the expanding wealth gap.

Buffett critiqued the efficacy of improving education and raising the minimum wage as strategies to narrow the gap. He argued that such measures might not achieve the desired outcomes swiftly or effectively enough, and in the case of the minimum wage, could potentially harm employment rates. 

Instead, Buffett championed the expansion of the EITC, a federal tax credit that benefits over 27 million taxpayers, particularly families with children, by supplementing their income based on earnings. He said the policy incentivizes work and skill improvement without distorting market forces, thus promoting employment.

Buffett’s stance on the EITC has remained consistent, as evidenced by his comments in a 2019 interview with Yahoo! Finance Editor-in-Chief Andy Serwer, as reported by CNBC. He reiterated the effectiveness of the EITC in aiding those who are disadvantaged by the market system despite being “perfectly decent citizens.” 

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While the EITC adjustments for 2024 offer incremental changes, such as the maximum credit reaching $7,830 for families with three qualifying children — up from $7,430 in 2023 — they fall short of Buffett’s broader vision for enhancing the program.

Despite the modest increases, another policy with a similar goal has gained traction: the Child Tax Credit (CTC). The bipartisan compromise proposal, although less ambitious than the temporary expansion under the American Rescue Plan, has emerged as a potential catalyst for reducing child poverty. The CTC is poised to lift approximately 400,000 children above the poverty line and alleviate the conditions of an additional 3 million children in its first year. By 2025, the impact is expected to be even more substantial when the proposal’s changes fully take effect.

For instance, under the proposed changes, a mother with two children earning $15,000 annually would be eligible for a $3,600 Child Tax Credit in 2023, a significant increase from the $1,875 available under the current law. This enhancement, though not restoring the credit to its full $2,000 per child level, represents a meaningful boost that could assist in covering essential expenses such as food, school supplies or childcare needs.

Although there is uncertainty surrounding policies like the Child Tax Credit, people have the opportunity to take immediate action in their financial lives. Consulting with a certified financial adviser offers a direct path to understanding personal financial situations, exploring options and developing a tailored strategy to achieve financial goals and mitigate the impact of wider economic disparities.

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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.