Tax Credit Helps Poor Get Ahead, Study Finds

The tax credit for the working poor that House Republicans have proposed converting from a lump sum to monthly payments provides crucial annual savings for people trying to get ahead, a study has found.

Half the 1998 recipients of the earned income tax credit who were questioned for the Syracuse University study said they planned to save at least a portion of their annual checks so they could move to better neighborhoods, pay tuitions or buy or repair cars.

“The EITC appears to be our most effective federal program for leading low-income families on a path toward true economic independence,” said Timothy M. Smeeding, director of the Center for Policy Research at Syracuse. “The EITC is what makes these expenditures possible.”

To balance the 2000 budget, House Republicans have proposed spreading the tax credit payment over a year, pushing part of the cost into the following budget year.

President Clinton has pledged to veto appropriations bills that change the payments, and GOP presidential front-runner George W. Bush has questioned such a plan’s effect on the working poor.

Created in 1975, the credit is intended to offset the payroll taxes people contribute for Social Security and Medicare. Last year, taxpayers earning from $10,000 to $31,000 were eligible, depending on number of children. The average 1998 claim was $1,459 for 19.4 million taxpayers. The Syracuse study was based on interviews with 826 Chicago-area recipients who used a free tax clinic to do their returns in 1998.