Obama Budget Would Expand Low-Income Tax Break
By JACKIE CALMES
MARCH 3, 2014 - New York Times
WASHINGTON — When President Obama
releases his proposed annual budget on Tuesday, he will grab his best
opportunity of the year to show, in one comprehensive package of hard numbers
and precise detail, how he would have the government address what he has called
gthe defining challenge of our timeh — economic inequality.
Many of Mr. Obamafs perennial
proposals on education, job training, research and more have hit a Republican
wall in Congress, but this year the president is adding one with echoes of
Republicansf own ideas. He will propose expanding a longstanding tax break to
better benefit workers who are childless, which the White House estimates will
help 13.5 million additional Americans who hold jobs yet remain poor. The
current tax break favors low-wage workers with children.
Mr. Obama would offset the costs,
$60 billion over 10 years, by ending two tax breaks for some wealthy taxpayers,
as a Republican House leader also recently proposed as part of a broader plan to
overhaul the tax code. The changes would close loopholes that lower taxes for
some self-employed professionals and investment-fund managers.
The White House had recently
signaled that Mr. Obamafs budget for the fiscal year that begins Oct. 1 would
embody Democratic priorities, shorn of unrequited concessions he made to
Republicans last year in hopes of a bipartisan bargain on tax and spending. But
by including the new tax-credit proposal and emphasizing its limited Republican
pedigree, Mr. Obama is underscoring his struggle to set an agenda that stands a
chance to become law, at least in part — in this case, to try to reduce
inequality of incomes and economic opportunity.
gFor the rest of my presidency,
thatfs where you should expect my administration to focus all our efforts,h Mr.
Obama said in December. But in the sixth year of his administration and the
fourth year of sharing government with the Republican House majority, more than
ever he confronts Washingtonfs judgment that his budget is already dead on
Capitol Hill.
So the White House is eager to
draw attention to an idea that might be taken seriously, both in the news media
and in Congress.
Advisers say Mr. Obama will
propose to double a childless workerfs maximum tax credit to about $1,000 a year
and increase the annual income level for qualifying for some benefit to about
$18,000 annually, roughly 50 percent over the federal poverty line for a single
adult. The credit would also be available to workers at age 21 instead of 24, as
long as they are living on their own, and remain available longer, until the age
of 67 rather than 65.
The earned-income tax credit began
as a Republican policy decades ago to reward work and discourage welfare, and
has been expanded through the years — by Mr. Obama and predecessors of both
parties — mainly to help families with children. But for childless adults and
those whose children are not in their custody, the credit has remained small and
phases out at low incomes.
Making it more generous for such
workers gjust makes a lot of sense,h said David H. Autor, an economics professor
at the Massachusetts Institute of Technology, especially as more young males
have been dropping out of the labor force. gMany of them do not have dependents,
or their dependents are with the mom. Giving them more incentive to work seems
like an excellent idea.h
Mr. Obama, previewing the idea in
his
State of the Union address in January, said that few federal policies gare
more effective at reducing inequality and helping families pull themselves up
through hard work than the earned-income tax credit.h But he said he agreed with
Senator Marco Rubio, a Florida Republican and potential 2016 presidential
candidate, gthat it doesnft do enough for single workers who donft have
kids.h
While Mr. Rubio did call recently
for more generous work incentives for single adults, that was about where his
agreement with Mr. Obama ended. Mr. Rubio proposed to replace the earned-income
tax credit, which comes to beneficiaries as an annual check, with a monthly
federal wage supplement for low-income workers. His idea, for which he has not
provided specifics, reflects increased hostility to the so-called E.I.T.C. among
conservatives, who say that it has become in effect a spending program,
vulnerable to fraud.
Representative Dave Camp, a
Michigan Republican who is chairman of the House Ways and Means Committee, last
week proposed
an overhaul of the federal tax code that also would eliminate the
earned-income tax credit. He would instead allow certain low-income workers to
exempt the first $4,000 of their federal payroll taxes for Social Security and
Medicare.
The liberal Center on Budget and
Policy Priorities objected that a single mother with two children, who works
full time at minimum wage earning $14,500 a year, would lose about $2,000 under
Mr. Campfs plan.
Other Republicans, including
leading economists, have reinforced their support for the earned-income tax
credit, and for increasing it for childless workers, especially as an
alternative to Democratsf separate proposal to increase the minimum wage, which
Republicans oppose. But Democrats, including Mr. Obama, say both benefits are
essential to help people who work escape poverty.
gWhat often gets lost in the
political debate,h said Nathaniel Hendren, a Harvard economist involved in a
long-term study of economic opportunity, gis the idea that wefre rightly
concerned about budget deficits, but if you think that intergenerational
mobility is the outcome that youfre aiming at with your policy, then you should
not cut back on things that you think are helping get kids up out of poverty.
Not only is that a good thing for those kids, but itfs also incredibly good for
the government budget if you take the long view.h
Among other proposals that Mr.
Obama will revive in his budget to improve the chances of upward mobility for
lower- and middle-class Americans is one making preschool universal for
4-year-olds, paid for with higher tobacco taxes. He would make permanent a tax
credit for college tuition, provide tax relief for those with federal grants or
loans for college, and expand the existing tax credit for full-time workersf
child care costs.