[Congressional Record Volume 140, Number 144 (Thursday, October 6, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 6, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                              EITC REFORM

                                 ______


                          HON. THOMAS E. PETRI

                              of wisconsin

                    in the house of representatives

                       Wednesday, October 5, 1994

  Mr. PETRI. Mr. Speaker, today I am introducing legislation to reform 
and expand the Earned Income Tax Credit. As you know, the EITC was last 
expanded in the Omnibus Reconciliation Act of 1993. I believe those 
changes will help many low-income families who are struggling despite 
the presence of a full-time worker in the household. However, I believe 
we can do more, especially for larger working families and for those 
faced with day care expenses for children who are of preschool age. My 
bill would increase the maximum income amount to which the credit is 
applied, bringing it up to the equivalent of full-time, year-round 
minimum wage earnings. My bill also would increase the percentage of 
the credit for those with two or more children and provide an 
additional credit for families with preschool children.
  As the welfare reform debate proceeds, we must remember that a major 
goal of reform is to move low-skilled people into jobs. Although most 
people want to work, many currently find that their skills do not 
enable them to earn as much as they could receive on welfare. Many of 
these people work anyway, hoping to improve their earnings over time, 
but they face great hardship in the meantime. Others remain caught in a 
welfare trap, facing financial penalties for trying to escape. Still 
others can earn slightly more than welfare would give them but not 
enough to pull them close to the poverty line. The basic problem is 
that economic need and, consequently, welfare payments vary by family 
size, but wages do not.
  Under my bill, a larger low-income working family with preschool 
children could receive a maximum EITC of $5,270 which is equivalent to 
a raise, above current law, of $1.03 per hour, for a total EITC benefit 
equivalent to $2.84 per hour for a full-time worker. Even for those 
with just one preschool child my bill provides for a maximum credit of 
$2,975, up from $2,040 when the 1993 changes are fully phased in. This 
is equivalent to a $.50 per hour raise for a total EITC of $1.60 per 
hour. For those whose children are of school age, my bill also includes 
an increase to $2,550 from $2,040 for one child and from $3,370 to 
$3,570 for those with two or more. The credit is also indexed for 
inflation.
  As family income rises above $10,000 per year, the credit phases down 
gradually with a slightly accelerated phaseout for the higher credit 
levels. For each type of family the credit is fully phased out at 
around $27,000 of family income, which is comparable to current law.
  I know that we are all concerned about the budget deficit but, based 
on preliminary estimates, the bill will pay for itself. It does this in 
two ways. First, it eliminates the credit under current law for people 
without children. Since this credit phases out before one reaches full-
time minimum wage earnings, it has the perverse effect of encouraging 
minimum wage workers to work only part-time. Furthermore, childless 
minimum wage workers who do work full-time, year-round, are already 
above the poverty line and don't need a credit. Eliminating it will 
save $800 million according to unofficial estimates by the 
Congressional Budget Office. My bill will also crack down on fraud in 
the program by requiring the IRS to verify the validity of social 
security numbers of those claiming the credit.
  This legislation is designed to help low-skilled people support 
families by working rather than through welfare. By directly 
supplementing the wages of low-income workers with children, this 
legislation achieves the broader objective of providing general help to 
these families based on economic need as determined by family size. I 
urge my colleagues to join me in extending greater, more carefully 
targeted benefits to family heads through the Earned Income Tax Credit.

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