More cash sought for working poor

from The Lexington Herald Leader

Today's topic: Earned income tax credit
By Tony Pugh
MCCLATCHY NEWSPAPERS

WASHINGTON --
As income tax-filing season hits full stride, millions of taxpayers are counting on an obscure government program to help pull their families out of poverty.

Under the Earned Income Tax Credit, the nation's largest cash-assistance program for the working poor, some low-wage workers who file tax returns will pocket up to $4,716 apiece this year.

Most of the nearly $44 billion in total payments for 2006 went to struggling families with children. But nearly 1 in 5 people who get the credit have no qualifying children, and there's growing concern that these taxpayers aren't getting their fair share.

Childless workers -- both single and married -- received just more than $1 billion for 2006, or only 2.4 percent of program spending, according to the Center on Budget and Policy Priorities, a research center for social-welfare issues.

This year, single and married workers with no qualifying children can get maximum credits of only $427. Those with one child can receive up to $2,853 and workers with two or more children can get up to $4,716.

These payment disparities make it harder for the tax credit to lift workers without children out of poverty, and provide little incentive for them to find jobs, both of which are primary goals of the program.

Many researchers, labor economists and Democratic lawmakers say it's time to at least double the maximum tax credit for childless workers, most of whom are poor, single men. Coupled with recent and future minimum-wage increases, that could go a long way toward easing poverty and decades of stagnating wages for low-skilled workers, they say.

House Ways and Means Committee Chairman Charles Rangel, D-N.Y., has introduced a broad tax-restructuring bill, HR 3970, that would double the maximum earned credit for childless workers next year and increase the income level at which the credit begins to phase out.

Rangel said the current $427 maximum was unfair, considering that childless workers were the only taxpayers who must pay federal income taxes even when their incomes fell below the federal poverty line.

"We should have a tax code that rewards hard work and helps individuals and families build a better future," he said.

The push for change is long overdue, many experts said, because work-force participation rates for less-educated men have been falling for decades, while rates for similarly educated women have increased. A more robust tax credit might help reverse that trend for men.

"It's certainly time to re-examine the Earned Income Tax Credit," said Michael Graetz, a Yale University law professor and tax-policy expert. "I think you can fairly ask the question whether or not it's not outdated in terms of being so small for people without children."

That sentiment, however, is hardly unanimous.

Between the earned income credit and the child tax credit, the government pays about $50 billion in tax credits to people with little or no income-tax liability, said Steven Hodge, the president of The Tax Foundation, a conservative anti-tax group. He said increasing those payouts would be a mistake.

"Why should we give an (enhanced) income supplement to a strapping 24-year-old male working at a construction site as a helper? It seems to me to be going beyond the intention" of the tax credit, Hodge said. " ... We have to be extremely careful about getting to a point where too many Americans are divorced from taxation and are net consumers of government."

Rangel said that people of all income levels got federal tax incentives to encourage beneficial activity, including work, homeownership and provision of health insurance. Enhancing wage supplements for low-wage workers is no different, he said.