Real Help Out of Poverty
When it comes to welfare-type spending, left and right often differ. But there is considerable agreement across the American political spectrum on the merits of the Earned Income Tax Credit (EITC). This tax-cutting and income-boosting system, after all, was started under President Ford in 1975, and expanded by Reagan, Bush, and Clinton.
The credit isn't cheap. Last year it provided $28 billion in tax benefits to nearly 19 million low-income workers and their families. But, according to recent research, the system works. It has reduced poverty among the working poor, especially those with children. It does so without raising employer costs. It encourages those on welfare to work or work harder. And it helps low-income workers share in economic growth.
EITC benefits offset taxes due. Frequently they don't just reduce or eliminate taxes. They actually add to income. The maximum benefits for 1997 were $2,210 for families with one child; $3,656 for families with two or more.
Benefits phase down gradually once annual income exceeds $11,930. After the EITC's last expansion in 1993, it became more controversial as costs escalated.
This year, in order to fund a broad tax cut, House Budget Committee chairman John Kasich submitted a bill that would have eliminated the credit for workers not raising minor children. Facing political flack, he withdrew that plan, only saying that cuts would be made.
The EITC may survive such trimming because the program's cost increases are expected to be modest as costs fall in inflation-adjusted terms. Measures already passed by Congress should curb cheating, such as taxpayers claiming fictitious children. For parents to qualify, all children must receive a Social Security number.
A recent think-tank study points out some gains from the EITC:
* It lifts 4.6 million people, including 2.4 million children, out of poverty. It trims child poverty more than any other federal program.
* It induces single mothers to go to work. Wages become more attractive because they add an EITC benefit.
* The program has offset one-fourth to one-third of the decline over the past 20 years in the share of national income received by the poorest fifth of households with children.
That's a good record, especially since the program does so little damage to the effective working of the marketplace for labor.
Congress shouldn't weaken it.