Clinton hopes to help working poor with tax plan
January 12, 2000
Web posted at: 3:36 p.m. EST (2036 GMT)
WASHINGTON -- President Bill Clinton unveiled Wednesday a $21 billion plan to combat poverty by expanding the earned income tax credit -- a move he described as part of a "last but still a new agenda" as his second term winds down.
The president entered the election-year tax fray in a Wednesday speech detailing his initiative to the moderate Democratic Leadership Council. He described his proposed "substantial increase" of the earned income tax credit program as a part of his "new opportunity agenda," which he planned to roll out in his January 27 State of the Union address to Congress.
"The main idea here is still the old idea of the American dream ... that if you work hard and play by the rules, you ought to have a decent life and a chance for your children to have a better one, " he said.
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President Bill Clinton spoke in front on the Democratic Leadership Council Wednesday where he unveiled a new tax plan.
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Clinton would boost the EITC for working families with three or more children by $500 in 2002, according to White House officials. The maximum credit in that category would be raised from $3,992 to $4,491.
The plan would also boost by $1,450 the earnings limit for married couples. A married, two-wage couple with children could earn up to $14,480 in 2001 and still receive the maximum credit, compared with the $13,030 threshold under current law. The provision would give the couple an additional $250 benefit. Families with two or more children would be allowed to retain more of the credit after they earn the maximum allowed.
Under current law, the credit is reduced by 21 percent for each dollar earned above the ceiling. Clinton's proposal would lower the phase-out rate to 19 percent.
The current program has an estimated cost of some $21 billion over 10 years. The EITC program annually helps nearly 20 million low-income, working families by giving them tax credits.
The earned income tax was created in 1975 with the idea of keeping people working while offsetting the payroll taxes workers pay for Social Security and Medicare. It was also implemented as an incentive to keep people off welfare.
Clinton said the studies have shown the EITC is "an enormously powerful incentive to work, even in modest paying jobs."
"They'll get a check at the end of the year as a credit against the taxes they pay because they are working hard for modest incomes," he said.
In 1998, taxpayers earning between $10,000 and $31,000 were eligible, depending on the number of children they had. The average 1998 claim was $1,459 for 19.4 million taxpayers.
Clinton's plan could help Vice President Al Gore in his bid for the 2000 Democratic presidential nomination. Former New Jersey Sen. Bill Bradley, Gore's lone opponent for the nomination, has proposed expanding the tax credit for low-wage workers as part of a $9.8 billion "wholesale rescue effort" for the poor.
White House Press Secretary Joe Lockhart on Wednesday denied the expansion is a response to any of Bradley's proposals, saying the president has had a long-term commitment to the earned income tax credit program. In 1993 -- Clinton's first year in office -- he pushed for the largest increase in the program's history, which the then-Democratic controlled Congress approved.
"He has been committed to this very successful program from day one," Lockhart said.
Clinton said the credit was in part responsible for the child poverty rate being at its lowest level in 20 years, and for why poverty among African-American children is at a record low.
Clinton's latest proposal would be subject to approval by an election-year Congress, where Republicans and Democrats are deeply divided over the size and shape of any potential tax cuts.
Congressional Republicans scaled back their tax-cutting efforts after Clinton vetoed their $792 billion cut proposal last year. The Congress' majority party is planning a far more modest package of educational tax breaks and marriage penalty relief for this year's legislative session.
The EITC became a political headache for House Republicans last year when, in an attempt to save money, they suggested changing the payments of the tax credit from a lump sum to monthly installments, arguing they could save $8.7 billion in fiscal 2000.
Clinton said the EITC was "anonymous" until the House Republicans proposed their change and "then all of sudden we all knew about and liked" it.
But Republicans abandoned the plan after Clinton threatened a veto and Republican presidential front-runner George W. Bush criticized the proposal, saying the federal budget should not be "balanced on the backs of the poor."
White House officials have said Clinton, in his State of the Union address, will offer an array of tax breaks roughly the same size as the $322 billion in initiatives he recommended to Congress last year. Clinton's program is expected to include a plan he put forward last year that would encourage Americans to put aside money for retirement.
CNN's Kathleen Koch and The Associated Press contributed to this report.
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