The Tax Foundation’s tax map this week shows EITC claims as a share of filers by state. Washington ranks No. 42. Go here for a good explanation of the EITC. BTW, today is Earned Income Tax Credit Day. Who knew?

The Tax Foundation summarizes the general resul.

Lower-income, southern states had a higher proportion of EITC recipients than other states. …On the flip side, higher-income states had the lowest proportions.

As the minimum wage debate heats up here and across the nation, it’s important to understand the role the EITC plays in helping low income families. Understanding that role helps put the minimum wage in perspective.

Economist David Neumark, one of the leading authorities on the minimum wage, points out that the EITC is more effective way at helping poor families than minimum wage hikes.

Proponents of raising the minimum wage often point out that the real minimum wage is lower now than it was decades ago.  But the federal policy aimed at low-wage work and low-income families has shifted — wisely — away from reliance on the minimum wage and toward a generous earned-income tax credit, which is better focused on poor families.  There is nothing wrong with reducing our reliance on a less effective policy when we have adopted a more effective one.

In a NYT piece that I recommend reading in its entirety, N. Gregory Mankiw further explains.

Advocates of a higher minimum wage like to note that the current minimum wage, adjusted for inflation, is low by historical standards. That is true but beside the point. Because the earned-income tax credit has grown over time, the minimum wage is increasingly less relevant. As a nation we have switched from Plan B to the better Plan A. And a good case can be made for eliminating Plan B entirely by repealing the minimum wage.

Not all agree, of course. On the left, Jared Bernstein writes that Mankiw presents a false choice. And on the right Sen. Marco Rubio wants to replace the EITC with a federal “monthly wage enhancement.” The Tax Policy Center thinks the idea may have merit, but Rubio needs to fill in the details.

In theory, a frequent wage supplement could make sense. Utilities and rent must be paid monthly, so there are advantages to a cash supplement that arrives at the same time as these recurring bills. Regular payments would also be more responsive to changes in earnings, just like the Supplemental Nutrition Assistance Program (SNAP – formerly Food Stamps) and other traditional anti-poverty programs. However, research shows that low-income families prefer to receive the EITC as a lump sum payment at the end of the year.

In addition, a monthly wage enhancement is a radical departure from current tax treatment, and Rubio’s specific plan is difficult to assess until he fills in gaps.  For instance, what would happen to a worker whose income changes during the year? Would Rubio’s plan provide supplements in some months and not others – even if annual wages ended up being quite high?

Good questions. Rubio may be on to something. Meanwhile, the EITC does an effective job of delivering direct assistance to the poor without creating the drag on employment caused by minimum wage increases.