[Congressional Record Volume 155, Number 2 (Wednesday, January 7, 2009)]
[Senate]
[Pages S172-S173]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself and Mr. Rockefeller):
  S. 24. A bill to amend the Internal Revenue Code of 1986 to 
strengthen the earned income tax credit; to the Committee on Finance.
  Mr. KERRY. Mr. President, today Senator Rockefeller and I are 
introducing the Strengthen the Earned Income Tax Credit Act of 2009. 
Since 1975, the earned income tax credit, EITC, has been an innovative 
tax credit which helps low-income working families. President Reagan 
referred to the EITC as ``the best antipoverty, the best pro-family, 
the best job creation measure to come out of Congress.'' According to 
the Center on Budget and Policy Priorities, the EITC lifts more 
children out of poverty than any other government program.
  It is time for us to reexamine the EITC and determine where we can 
strengthen it. Census data and the events of Hurricane Katrina 
reiterated the fact that there is a group of Americans that are falling 
behind. The poverty rate for 2007 was 12.5 percent and this is 
basically the same as the rate for 2006. In 2007, there were 37.3 
million living in poverty.
  We need to help the low-income workers who struggle day after day 
trying to make ends meet. They have been left behind in the economic 
policies of the last 8 years. We need to begin a discussion on how to 
help those that have been left behind. The EITC is the perfect place to 
start.
  The Strengthen the Earned Income Tax Credit Act of 2009 strengthens 
the EITC by making the following four changes: reducing the marriage 
penalty; increasing the credit for families with three or more 
children; expanding credit amount for individuals with no children; and 
simplifying the credit.
  First, the legislation increases marriage penalty relief and makes it 
permanent. In the way that the EITC is currently structured, many 
single individuals that marry find themselves faced with a reduction in 
their EITC. The tax code should not penalize individuals who marry.
  Second, the legislation increases the credit for families with three 
or more children. Under current law, the credit amount is based on one 
child or two or more children. This legislation would create a new 
credit amount based on three or more children. One of the purposes of 
the EITC is to lift families above the poverty level. Because the EITC 
adjustment for family size is limited to two children, over time large 
families will not be kept above the poverty threshold.
  Under current law, the maximum EITC for an individual with two or 
more children is $5,028 and under this legislation, the amount would 
increase to $5,656 for an individual with three or more children. 
Increasing the credit amount would make more families eligible for the 
EITC. Currently, an individual with three children and income at and 
above $40,295 would not benefit from the credit. Under this 
legislation, an individual with children and income under $43,276 would 
benefit from the EITC.
  Third, this legislation would increase the credit amount for 
childless workers. The EITC was designed to help childless workers 
offset their payroll tax liability. The credit phase-in was set to 
equal the employee share of the payroll tax, 7.65 percent. However, in 
reality, the employee bears the burden of both the employee and 
employer portion of the payroll tax.
  For 2008, the EITC will fully offset the employee share of payroll 
taxes only for childless workers earning less than $5,720. A typical 
single childless adult will begin to owe Federal income taxes in 
addition to payroll taxes when his or her income is only $10,655, which 
is below the poverty line.
  The decline in the labor force of single men has been troubling. 
Boosting the EITC for childless workers could be part of solution for 
increasing work among this group. Increasing the EITC for families has 
increased labor rates for single mothers and hopefully, it can do the 
same for this group.
  This legislation doubles the credit rate for individual taxpayers and 
married taxpayers without children. The credit rate and phase-out rate 
of 7.65 percent is doubled to 15.3 percent. For 2007, the maximum 
credit amount for an individual would increase from $457 to $913. The 
doubling of the phase-out results in taxpayers in the same income range 
being eligible for the credit. In addition, the legislation would 
increase the credit phase-out income level from $7,470 to $13,800 for 
2009 and $14,500 for 2010.
  Under current law, workers under age 25 are ineligible for the 
childless workers EITC. The Strengthen the Earned Income Tax Credit Act 
of 2009 would change the age to 21. This age change will provide an 
incentive for labor for less-educated younger adults.
  Fourth, the Strengthen the Earned Income Tax Credit Act of 2009 
simplifies the EITC by modifying the abandoned spouse rule, clarifying 
the qualifying child rules, and repealing the disqualified investment 
test. Current rules require parents to file a joint tax return to claim 
the EITC. This can create difficulty for separated parents. If parents 
are separated and not yet divorced, complex rules govern whether the 
custodial parent may claim the EITC if a separate return is filed. The 
custodial parent must be able to claim head-of-household filing status. 
This test requires that a parent must pay more than half of household 
expenses from her own earnings, rather than from child support payments 
or program benefits. Under this legislation, the requirements by 
permitting a separated parent who lives with for more than six months 
of the year and also lives apart from his/her spouse for at least the 
final six months of the year to claim the EITC.
  Under current law, two adults who live in the same household with a 
child may each qualify to claim the child for the EITC, but only one 
taxpayer may claim the child and the other taxpayer is not eligible to 
claim the childless worker EITC. Under this legislation, filers who are 
eligible to claim a child for the EITC but do not do so are eligible to 
claim the smaller EITC for workers not raising a child. For example, a 
mother and aunt living in the same house who are both qualified to 
claim the child would be able to receive the EITC. The one who claims 
the child would get the larger amount and the other would be eligible 
for the smaller childless worker credit.
  Under current law, low-income filers are ineligible for the EITC if 
they have investment income such as interest, dividends, capital gains, 
rent or royalties that exceeds $3,950 a year. Very few EITC claimants 
have investment income above this level. This income

[[Page S173]]

test creates a ``cliff'' because those workers with investment income 
of $2,951 would be unable to claim any EITC. This provision discourages 
savings among low- and moderate-income families. Under this 
legislation, the investment income test would be repealed.
  This legislation will help those who most need our help. It will put 
more money in their pay check. We need to invest in our families and 
help individuals who want to make a living by working. I urge my 
colleagues to support an expansion of the EITC.
                                 ______