When former President Ronald Reagan called the Earned Income Tax Credit "the best antipoverty, the best pro-family, the best job creation measure to come out of Congress," he was thinking about Alicia Young.
Alicia Young, a Northside resident, works two jobs while raising two children and a toddler grandson. President Bush's proposed "pre-audit" may make it harder for her to claim the Earned Income Tax Credit.Young is a Northside resident who is working two jobs while raising two children and a toddler grandson. Like millions of other working parents with children and an income less than $33,178, Young received the Earned Income Tax Credit last year. "It helped me pay off some bills and move into a better place," she says.
The EITC is credited with lifting more working families out of poverty since 1975 than any other federal program. According to the Internal Revenue Service, in Marion County alone nearly 70,000 taxpayers filed claims for the EITC in 2002.The EITC is not a handout. It is a refund of money the worker has already paid in regressive payroll and other taxes, which makes it one of the few programs that Republicans and Democrats are both proud to take credit for.
So why is President George W. Bush trying to make it harder for Alicia Young?
Just when it seemed that the president was through using the tax code to penalize low-income families (see, Inequitable $350 billion Tax Cut), Bush's Internal Revenue Service is planning to implement a program that would require what critics are calling a "pre-audit" of some low- and moderate-income workers.
Under Bush's plan, single fathers, grandmothers or adoptive parents claiming the EITC will face precertification requirements like proving residency, providing sworn affidavits of third parties and producing birth and marriage certificates. An analysis by the Center on Budget and Policy Priorities says that many potential filers will find it impossible to comply with some of the more draconian paperwork requirements the IRS is planning on imposing. But the IRS plans to enforce these requirements on 45,000 EITC taxpayers this year and expand the number to as many as 5 million workers by 2006.
Bush builds a wall
Advocates say there has never before been a precertification requirement imposed on a whole class of wage-earners. "It's an audit before you do your tax return," says Julie Kruse of the Chicago-based Center for Economic Progress, which provides volunteer tax preparation for low-income filers. "The IRS says they are trying to build a sieve to keep out ineligible filers, but we feel they are building a wall that will keep a lot of eligible people from getting the credit they are entitled to."
Why would Bush want to build this wall? Recent congressional changes to the EITC program simplifies the application process, which Bush Administration officials admit should reduce the EITC error rate. The IRS already audits EITC taxpayers at twice the rate of other taxpayers. And most of the U.S. tax revenue lost to fraud is certainly not attributable to the working poor.
"While the audit rate of wealthy people has declined, 91 percent of returns showing incomes over $100,000 claim deductions that the IRS cannot verify," says Rep. Charles Rangel (D-N.Y.), the ranking Democrat on the House Ways and Means Committee, which writes the federal tax code. "Big corporations have avoided paying millions of taxes using complex loopholes, many of which turn out to be illegal. Yet the Bush Administration does not require precertification of records for wealthy or big business taxpayers as they do for EITC filers."
Rep. Julia Carson (D-Indianapolis) is joining Rangel in sponsoring a bill to block Bush's proposed precertification requirements, and signed on to a letter to the IRS protesting the plan. "These are not megabuck multinational corporations but real people, Americans who do not have high-priced tax consultants and accountants," Carson says. "It is cruelly foolish to try to discourage them from making use of this benefit by raising curtains of red tape."
In typical Bush Administration fashion (see, Cheney Secret Energy Policy Meetings), the plans to impose the pre-audit were made in complete secrecy. "There is no official commitment by the IRS to even allow a public comment period on this change," Kruse says. "We are saying that there should be some dialogue with Congress and the public before going forward with this."One of the most galling aspects of the Bush proposal is that it is certain to exacerbate the real misreporting tragedy of the tax credit program: People who need and deserve the credit don't get it. According to the U.S. General Accounting Office, 4.3 million EITC-eligible taxpayers erroneously don't claim or receive the credit.
The Indianapolis Asset Building Campaign is part of a national effort to help encourage working parents to claim the tax credit. ("Free Tax Service Helps Working Families," NUVO, March 19, 2003) Campaign coordinator Allison Luthe says that the Bush proposal will put up an unwanted barrier to their efforts. "One of our goals is to reach people who are not filing returns because they don't realize they qualify for the credit," Luthe says. "We are worried this is going to potentially discourage people from applying."
Which, you have to conclude, is just what President Bush has been aiming for all along.
Fran Quigley is a contributing editor to NUVO, where this article originally appeared - www.nuvo.net