[Congressional Record Volume 147, Number 152 (Tuesday, November 6, 2001)]
[Senate]
[Pages S11492-S11493]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SESSIONS (for himself and Mr. Nickles):
  S. 1641. A bill to impose additional requirements to ensure greater 
use of the advance payment of the earned income credit and to extend 
such advanced payment to all taxpayers eligible for the credit; to the 
Committee on Finance.
  Mr. SESSIONS. Mr. President, I take this opportunity to discuss 
legislation I have offered that would be good public policy for the 
country and a terrific stimulus for the economy beginning in January. 
Let me explain what this is about.
  We have in this country a policy of helping the working poor called 
the earned income tax credit. That was passed in 1975. It was designed 
to help lower income people working on an hourly wage have a higher 
income to take care of their families. It is shaded in fact pretty 
heavily in favor of low-income people who have children.
  It has worked well on the whole. There have been a lot of people who 
have criticized it. They have called it welfare. In a way, it is a 
benefit given. But it is a benefit given in exchange for work, when a 
person works. It is a benefit from the Federal Government called the 
earned income tax credit. It is a tax credit. If you work, you earn it. 
It has in general been a good way to help the working poor, as we call 
them today. Since 1975, we have done that.
  The way the person receives the money, however, is detached from 
their work. The way a person receives their earned income tax credit is 
to file their tax return in February, March, April and get a tax return 
the next year after working all year. For example, for the year 2001, a 
low-income worker with two or more children could claim $4,008 in 
earned income tax credit, a worker with one child could receive up to 
$2,428, and a worker with no children could receive $364. The average 
earned income tax credit for a beneficiary with a qualifying child, one 
child, in 1999, was $1,941. That is about $150 a month, almost $1 an 
hour when figured on 160 hours for a month. It is a significant benefit 
from the Federal Government.
  From a public policy point of view, it has been less effective in 
achieving the goal we want it to achieve, which is to encourage work, 
because it is received at the end of the year, really the next year; 
and it is disconnected to the work the person has undertaken.
  We want to encourage people to work. We want work to be more 
rewarding. We want a person making $6 an hour making $7 an hour, just 
like that. Let's have them make $8 an hour if they were making $7. This 
could be done if we could in fact have this earned income tax credit 
paid at the time the person works, as part of their paycheck.
  In fact, this idea had been discussed earlier, a number of years ago. 
We passed a bill in this Congress that would allow people to choose 
this and, oddly, not many people have. However, most people don't fully 
understand it. Others are afraid they might end up having a tax 
liability next year and didn't choose it. I don't think businesses have 
encouraged people to take it as much as they should and, as a result, 
only 5 percent of the people who are eligible and choose this earned 
income tax credit have it paid to them in advance when they work. So I 
think we have a problem there. We can strengthen our economy and we can 
strengthen the reward for a person going to work if we tie this credit 
to the work they do, to their paycheck.
  In addition, I have discovered that the earned income tax credit is 
worth, for America, $31 billion a year. That is a lot of money by any 
standard. As we are looking at this time how to create an infusion of 
cash into our economy in a way that would strengthen this economy to 
make it more healthy, more vibrant, to get people purchasing again, to 
put dollars in the hands of consumers, I can think of no better way 
with the least possible cost to the Treasury than to have this money 
that would be entitled to come in the next fiscal year actually start 
coming in January on a person's paycheck. I think that would be a 
tremendous way to pour additional money into the economy without having 
any impact on the Treasury, except the loss of interest on the money 
the Federal Government would be sitting on. This would not hurt poor 
people in any way. It would not withhold or delay them receiving any 
money. But in fact it would advance their receipt of the money. So they 
would be receiving in February, March, April, May, when their tax 
refund comes due, their refund under the earned income tax credit for 
this year's work, but they would have already begun on January 1 of 
this year to receive on their paycheck the money for next year. So it 
would advance that payment and would provide a real stimulus to the 
economy because low-income people are going to be the ones who are most 
likely to spend it.
  Remember, it would impact their paychecks significantly in that there 
is no withholding from this earned income tax credit. They will have 
already paid their insurance, retirement benefits, Social Security, 
FICA, and withholding taxes. All of that would have already been paid. 
Whatever they get in addition would be money they could put into their 
pockets. So it would achieve the goal of the earned income tax credit 
to enhance and make work more valuable and, at the same

[[Page S11493]]

time, would provide a tremendous stimulus to our economy. I am excited 
about this possibility, and I know Senator Reed, who is in the chair, 
and I have discussed this. He was at least intrigued by this idea.
  I was pleased today that Senator Nickles, who has been a critic of 
the earned income tax credit, one who has studied it carefully and has 
observed some of its problems, believes it is a good reform, and he is 
supporting and has signed onto this bill as an original cosponsor.
  So we have an opportunity to do something good for the economy, to do 
something good for poor people, to in effect have the businesses that 
now have to provide the option to their employees to go on and provide 
this money, which is reimbursed by the Federal Government immediately--
it doesn't cost them anything--and their workers would receive 50 or 60 
cents an hour pay raise as a result of this payment. I think it is 
something they ought to be excited about doing. I think it would 
enhance their workers benefits from working and make them better 
employees.

  So it is time for us to do it now. I have been concerned about the 
issue. I have studied it for a number of years. I had some independent 
research done on it several years ago, and I have been thinking and 
looking for an opportunity to present it in the form of legislation. At 
this time, when we need a financial stimulus, I can't think of a better 
time. So I am asking the Finance Committee, and I have talked with the 
Director of the OMB, Mitch Daniels, the Secretary of the Treasury, Mr. 
O'Neill, and his top staff person. They are all intrigued by this and 
believe it has merit.
  I think it is time for us to consider that this be a part of our 
stimulus package. It has little long-term impact on the Federal 
Treasury, but it would provide a tremendous infusion of cash into the 
economy just at the time we need people to go to the store and buy 
things, generating demand out there that would allow factories to 
produce more products. It would be giving additional wages to people 
who may be getting less overtime now than they were a year ago--maybe 
not even getting 40 hours a week now as they were last year. Those 
people would receive higher wages for each hour they do work.
  I talked to a businessperson today, and they said they were on 4-day 
workweeks with their employees. They hated to do it, but there wasn't 
demand for their products sufficient to keep them fully engaged. Rather 
than lay people off, they put everybody on a 4-day workweek. So a lot 
of people are losing hours, and this would help keep them from losing 
income. I think it is good for the low-income workers in America. I 
think it is good for the economy, and I think it is good public policy 
for America.
  Mr. President, we have talked with members of the Finance Committee 
and with the administration. I hope they will seize this opportunity to 
do something that, to me, has a win-win-win all over it, with no 
negatives. It is the right thing to do. Some say, well, business people 
may not want to handle the paperwork on this. Businesspeople print 
their checks out by computers, and it is not difficult for them. The 
money is paid to them. I talked to one gentlemen who hires employees--
quite a number of low-income workers. He said he though it was a 
wonderful idea. It would be great for his workers, and it would be no 
problem at all for them to make that a part of their payroll check 
plan. It is just a matter of getting the person who processes that to 
factor it in, and it works rather easily.
  Again, I believe it is a good idea, and I have submitted it to the 
Senate. I will be talking with the leadership and urging its passage. 
It is the right thing to do, and I think we ought to do it. The time is 
long past that we make this earned income tax credit really do what it 
is supposed to do, which is encourage work. It is to encourage people 
to work and, at the same time, when we do it by advancing it this year, 
we will provide a stimulus to the economy in a very significant way. We 
estimate that out of $31 billion in earned income tax credit, we would 
be advancing at least $15 billion next year, and that would be a 
healthy stimulus indeed for the economy.
                                 ______