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FOR five years Congress has worked to expand a tax break for the lowest-income Americans. It's called the earned-income tax credit, and it reduces the taxes owed by the working poor, usually resulting in a refund. In 1989, 11.9 million households took advantage of the credit, receiving an average of $700 from Uncle Sam. By means of the tax credit, nearly $7 billion in federal dollars were plowed back into state and local economies in '89.

This program has been a favorite of conservatives and liberals alike. It rewards those who work, and - until the current year - it had been relatively simple to administer.

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The problem, now, is that Congress may have gone too far in tinkering with the credit last year. In the course of again expanding the credit, lawmakers added on some measures that threaten to turn straightforward aid for working families into yet another tax-form maze for the unsuspecting public.

Sen. Lloyd Bentsen (D) of Texas, for example, succeeded in attaching a provision designed to broaden the credit for poor families who buy health insurance. The idea is to encourage such families to purchase health coverage, but the Internal Revenue Service, of course, will need added information to confirm family health-care expenses. White House chief of staff John Sununu used his influence to see that the credit was expanded for families in which one parent works and the other stays home to care for a n

infant. Documentation, again, is required.

The upshot is five new pages of tables in IRS instructional materials and a new two-page form. Before the 1990 changes, eligible tax filers had only to fill in an additional line on their Form 1040. Many advocates of the earned-income credit worry that poor families will shy away from the added paperwork. The number of Americans claiming the credit - which has been rising year by year as people become more aware of the benefit - is likely to drop when the new procedures take effect next tax season.

If that occurs, the irony will fall heavily on Congress. In anticipation of that, Congress should start now to resimplify the credit, so that a maximum of people can take advantage of it.

Concerns such as those raised by Messrs. Bentsen and Sununu will not go away, but a better way to embrace them might be a large enough expansion of the basic credit to give poor families greater ability to pay for health insurance or cover child-rearing expenses.

It would be irresponsible to leave the credit in its present encumbered, and potentially less effective, state.

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