Targeting the Working Poor

September 05, 1995

Gerald Ford put it into law. Ronald Reagan extolled it as "the best anti-poverty, the best pro-family, the best job-creation measure to come out of Congress." George Bush expanded the program still more. Called the Earned Income Tax Credit, it fulfills Republican objectives in rewarding work, drawing people off welfare and raising up the working poor above the poverty level without increasing minimum wages.

So why are some of the gung-ho conservatives on Capitol Hill intent on slashing away at a popular, bipartisan federal initiative that helps 14 million low-income Americans make ends meet? Why are they raiding a program that rewards work at the same time they are out to reform welfare by making recipients work?

There are some easy but unconvincing answers. Fraud, for one. EITC has expanded so quickly in recent years, especially because of wage stagnancy at lower levels, that a government review showed a shocking 26 percent abuse rate. The drive to balance the budget, for another. GOP lawmakers are frantic to find ways to reduce the budget, and cutbacks in the Earned Income Tax Credit could save the Treasury an estimated $21 billion over seven years. A third complaint is that EITC provides as much as $3,500 a year for a family of four with income under $11,000 but its rewards diminish so much up to the $27,000 level that it becomes a disincentive to increased work effort.

Fraud, of course, should not be tolerated. The Internal Revenue Service is cracking down and lowering the abuse rate to a point where it now is comparable to phony claims on the capital gains tax by higher-income citizens. Balancing the budget is Washington's current mantra, to be sure. But at the same time Republicans favor giving $500 child credits to families in the $200,000-plus bracket they are, in effect, increasing the tax bite on the working poor. As for the disincentive to work as income rises, that is a technical flaw that can be corrected.

The assault on the Earned Income Tax Credit cannot be justified on grounds of logic, fairness or even plain old politics. EITC remains popular -- far more popular than much-maligned welfare programs that foster indolence and dependency.

This newspaper has long favored vigorous action to reduce the deficit. But before Congress harms a program that helps the working poor, it should scrap any idea of cutting income taxes for higher-income citizens, a move that could cost the Treasury ten times as much as any likely reductions in Earned Income Tax Credit benefits.

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