GOP Negotiators Agree on Tax Credit Cutback for Poor

Congressional Republicans have tentatively agreed to cut the Earned Income Tax Credit for the working poor by $32 billion over seven years.

But negotiators emerging from closed-door sessions Saturday said that in agreeing to the cut they had reworked the formulas for the credit to ensure that families with children would gain as much from a proposed $500-per-child tax credit as they lose from the cutback in the earned credit.

We worked “the schedules to make sure every family came out fine,” said Sen. Don Nickles (R-Okla.), who has harshly criticized the earned income credit as a fraud-ridden, wealth-transfer program.

The $32-billion figure represents a compromise between already-passed legislation in which the House scaled back the credit by $23 billion and the Senate by $42 billion.

The earned income credit is aimed at families earning less than $28,000 a year and is intended to lower their income tax bill and give them a cash subsidy to pay for Social Security and Medicare taxes withheld on their paychecks and other expenses.

Democrats have questioned the fairness of reducing the earned income credit at the same time the Republican Congress is planning to hand out $245 billion in tax cuts to businesses and families, including those who are well off.

The changes agreed upon by negotiators for the House and Senate, who also are putting together compromises on Medicare savings and the entire tax-cut package, are designed to blunt the Democratic criticism and satisfy GOP moderates in the House who were concerned about cutting the credit too much.