Tax Credit Geared For Working Poor Stays in Budget Mix
DALE and Connie Risner of Mount Sterling, Ky., had never ridden an airplane before last week, when they found themselves whisked to Washington in their best clothes with their three daughters and thrust briefly into the vortex of budget politics.
Both parents work, but their $16,000 in income last year still left them below the poverty line, and the $700 they received from the Earned Income Tax Credit was critical to their family budget.
The first federal budget drafted by Democrats in a dozen years includes a $21 billion expansion of the EITC over five years.
For many American households that are poor and yet have a full-time worker, the budget bill facing final votes this week should bring substantially more money into the household in one of the budget's few spending increases. For the Risners, brought to Washington to illustrate the impact of the credit, that increase would eventually bring their annual credit up to $2,380 and lift them above the official poverty level. The expansion is designed to bring families with at least one full-time worker at minim um wage up to the poverty line, making good on a Clinton campaign promise. "To make sure that no one with a family who works full-time has to raise children in poverty, we will increase the Earned Income Tax Credit to make up the difference between the family's earnings and the poverty level," Bill Clinton promised in his campaign book, "Putting People First."
Mr. Clinton proposed a $28 billion five-year expansion of the credit. The House passed it, but the Senate passed only a $18 billion version. The conference committee has settled on $21 billion, chiefly by stretching out the phasing-in of the higher credits to three years instead of two.
The EITC is widely supported by Republicans and Democrats as a program that sustains families and supports gainful work. The EITC is already expanding under the 1990 budget agreement signed by President Bush.
The EITC works so that for every dollar a poor family earns, they receive additional tax credit. Above about $12,000 in income, the percentage of the credit steadily decreases. The credit is intended to boost family income while serving as an incentive for work and earning, rather than a retreat to dependency.
When the Clinton plan is fully in effect, a family with two or more children earning $8,840 - full-time work at minimum wage - will receive a credit of 40 cents for every dollar earned. With several thousand dollars in food stamps and the $3,370 in tax credits, the family would reach the poverty line.
Under current law, the maximum credit by next year will be $2,000. The average amount that roughly 14 million families now receive is about $900.
The new EITC, if Congress passes it, will extend for the first time to families without children earning less than $9,000 a year. The maximum credit for them would be $300, but the average eligible family would receive about $175, according to the Center for Budget and Policy Priorities, a liberal research organization.
As Dale Risner explained while his and two other poor families were arranged in a living-room tableau on a stage with Bill and Hillary Clinton last week, the $700 tax credit helped him buy materials to construct an office he uses as a tax preparer. Even a few hundred dollars more would help him buy more adequate health insurance, he said by telephone later. "Things are real tight for us." Connie Risner works full time at close to minimum wage, and Dale takes on as much work as he can get doing taxes.