[Congressional Record Volume 147, Number 178 (Thursday, December 20, 2001)]
[Extensions of Remarks]
[Pages E2402-E2403]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   INTRODUCTION OF LEGISLATION TO EXPAND THE EARNED INCOME TAX CREDIT

                                 ______
                                 

                         HON. WILLIAM J. COYNE

                            of pennsylvania

                    in the house of representatives

                      Thursday, December 20, 2001

  Mr. COYNE. Mr. Speaker, since its inception in 1975, the Earned 
Income Tax Credit, or EITC, has been an important part of the Federal 
Government's ``safety net'' of programs for Americans living in 
poverty. Its effect on children is especially significant. Over the 
years, the EITC has succeeded in lifting more children out of poverty 
than any other government program.
  The EITC was conceived as a ``work bonus'' alternative to a proposal 
to provide cash welfare to low-income two-parent families. It was also 
seen as a way to lighten the burden of Social Security taxes on low-
income workers. Over the years, the credit has been expanded and 
increased. This program demonstrates the way in which government can 
improve the lives of its citizens in a meaningful way.
  However, notable pockets of poverty remain in our country. For 
instance, 29 percent of all children in families having three or more 
children subsist at incomes below the poverty

[[Page E2403]]

level. This is more than double the poverty rate among children in 
smaller families. Nearly three of every five poor children in this 
country live in families with three or more children.
  Recently the General Accounting Office (GAO) determined that 4.3 
million eligible households did not claim the EITC in 1999, forgoing 
$2.6 billion in credits. The preponderance (about 81 percent) of the 
$2.6 billion in unclaimed credits would have gone to households with 
three or more children. Households with no eligible children would have 
received most of the remainder. The non-participation rates for these 
two groups, 37 percent for households with three or more children and 
55 percent for childless households (as compared to roughly 95 percent 
for all other households), are convincing evidence that more needs to 
be done to expand and simplify the EITC program.
  The current structure of the EITC fails to help larger families, with 
three or more children, since the highest level of credit is given to 
families with two or more children. Combining these larger families 
with families having two children ignores the unique needs of large 
families, which have experienced more difficulty in moving from welfare 
to work due to increased family expenditures such as child care costs.
  Today I am introducing legislation to remedy this problem by creating 
a new EITC benefit level for families with three or more children. This 
new level, with a credit percentage of 45 percent, will provide a 
higher benefit for these families than what they currently receive 
under the ``two or more children'' category (which has a 40 percent 
credit rate).
  My bill also will double the credit percentage for workers with no 
qualifying children from 7.65 percent to 15.3 percent. This change 
recognizes the fact that there is virtually no safety net for people in 
this category, who face high federal tax burdens. The 15.3 percent 
credit percentage is the amount needed to offset the full amount of the 
payroll tax, including the employer's share. In his paper, ``should the 
EITC for Workers Without children be Abolished, Maintained, or 
Expanded?'' Robert Greenstein, of the Center on Budget and Policy 
Priorities, notes that single workers are the only group in the United 
States who begin to owe federal income tax before their income reaches 
the poverty line; the federal income tax codes taxes them somewhat more 
deeply into poverty. Besides offsetting the full amount of the payroll 
tax (which most economists believe is borne by workers in the form of 
lower wages), Mr. Greenstein states that expanding the credit might 
also serve two other beneficial purposes--it might draw more single 
workers into the labor force and it should raise the incomes of some 
poor, non-custodial fathers, thereby increasing their ability to pay 
child support.
  In addition, the bill will increase EITC benefits for all family 
categories by raising the maximum creditable earnings used to calculate 
the credit. For all eligible individuals with children, this amount for 
the year 2002 will be $10,710, the annual wages of a full-time worker 
earning the minimum wage. Isabel Sawhill and Adam Thomas, of the 
Brookings Institution, in their paper ``A Hand Up for the Bottom Third: 
toward a New Agenda for Low-Income Working Families,'' note that those 
who work full-time at a low wage job do not necessarily qualify for 
more benefits than do those who work less than full-time. They suggest 
that extending the maximum creditable earnings to the level 
corresponding with a full-time, minumum-wage salary would be in keeping 
with the EITC program's goal of ``making work pay.'' In other words, 
workers could be expected to work more hours if the income eligibility 
range for the EITC were extended or if the credit earned were 
increased. For childless workers, the maximum creditable earnings will 
rise to $6,000, approximately 60 percent of those wages.
  Taken together, in 2002, these changes would provide the following 
maximum EITC amounts: Household with no qualifying children $918 (an 
increase of $542); household with 1 child $3,641 (an increase of 
$1,135); household with 2 children $4,284 (an increase of $144); 
household with 3 or more children $4,820 (an increase of $680).
  In order to balance program costs, my bill increases the phaseout 
rates for all categories to allow benefits to phase out at the same 
income level as is the case under current law.
  Finally my bill makes two important changes to the administration of 
the EITC--it eliminates the investment income disqualification test and 
it simplifies the rules for an abandoned spouse to qualify for the 
credit.
  At at time when our country is undergoing so much change, we must not 
forget that our low-income families continue to remain at the margins 
of our economy and could be the first to suffer the effects of the 
current economic downturn. Their needs existed before the tragic events 
of September 11 and probably have only worsened since then.
  I believe that the creation of the additional EITC category involving 
three or more children will benefit approximately 3.2 million 
households, thereby further reducing poverty among larger families. In 
addition to helping larger families to make ends meet, this new benefit 
level will provide these families with funds for upward mobility and 
asset building capabilities. Even a moderate increase in income will 
assist these families to improve their circumstances and work toward 
escaping poverty.
  This bill also will benefit the U.S. economy by providing additional 
incentives for more people, especially low-income women, to join the 
work force. The economic stimulus function of my bill cannot be 
overlooked, especially at a time when we are providing inducements for 
corporations and higher income earners.
  The Center on Budget and Policy Priorities supports this legislation 
as a ``bill that would better reward and encourage work, reduce poverty 
among the working poor, and simplify the EITC.'' They further state 
``This is one of the most worthy initiatives policymakers could 
pursue.''
  I urge my colleagues to join me in this effort to further enhance the 
highly successful EITC by supporting this legislation, and, in doing 
so, by supporting a respectable income level for those Americans who 
are, and have been, left behind.

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