Does it make sense to make it more difficult for America’s working poor families—who can barely make ends meet as it is—to save as much money as they can to take care of their needs?
Does it make sense to deter them from using a federal program that helps them stay on the right side of self-sufficiency?
Those are questions that demand an answer—and action—from President Bush and the Congress.
They stem from the news that, as Internal Revenue Service audits of tax returns from affluent individuals and corporations have declined sharply, the IRS has concentrated more and more of its attention on auditing the returns of the working poor—those who apply for the Earned Income Tax Credit.
The likelihood of any individual tax return being audited last year was less than one in 200, a steep drop from the one in 60 rate of 1996.
Yet, taxpayers who sought to use the EITC, America’s poorest workers, accounted for 44 percent of all IRS audits last year.
That figure presents an astonishing contrast to the fact that the one-in-370 audit rate for taxpayers who didn’t seek the EITC. For taxpayers who earned more than $100,000—they pay 62 percent of all individual income taxes—the rate was about one in 100.
Furthermore, IRS audits of corporations declined by nearly 13 percent last year from the record low of 1999.
So, it seems that every group of taxpayers are getting a break except those most in need of one.
To be sure, this isn’t the IRS’ doing. Several years ago Congress ordered the IRS, beleaguered by sharp cuts in its own budget since the 1980s, to pay less attention to the tax returns of the affluent and more to those of the poor, and the idea was endorsed by the Clinton Administration.
But, regardless of who’s responsible, this makes no sense.
Of course, the government is right to want to ensure that taxpayers follow the rules. Of course, it’s right to seek to ferret out the tax cheats, and send a strong message that cheating won’t work. But the audit-rate statistics show that, unjustifiably, those with the least amount of money and resources are getting the most scrutiny and bearing the heaviest burden.
Those who utilize the Earned Income Tax Credit are wage earners whose salaries hover right at the minimum wage of $5.15 an hour. They occupy a precarious position on the occupational ladder: at the bottom rungs, with jobs that provide few, if
any benefits, and which can disappear with just the slightest downward movement of the economy. They need all the money they can lawfully hold on to.
The Earned Income Tax Credit has been a way for them to do that. It has sent a powerful message that the government has recognized their plight and wants to help them find ways to contribute to society, not be dependent on it for handouts.
The IRS focus on the working poor sends just the wrong message: It declares to the working poor that using the EITC could bring, at the very least, a great deal of inconvenience to people who have very little time and resources with which to deal with inconvenience.
Looked at in broader terms, the news of this particular burden on the working poor underscores the point that the federal government and the new administration has some important “unfinished business” in the continuing war on poverty.
For example, that the black unemployment rate now stands at 7.6 percent and black teen unemployment at 26.7 percent, stunning declines from a decade ago is great—and yet, still not good enough: The jobless rate for blacks is still nearly twice the national average of 4 percent; and the unemployment rate for black teenagers remains twice the overall rate for teenagers.
One thing President Bush can do to bring the black employment rates even closer to the national average is to champion fiscal and monetary policies by Congress and the Federal Reserve Board that avert recession and promote continued job growth. It’s critical for Black America’s health and the nation’s health that those who are finally gaining access to the labor market not be shut out again.
In addition, President Bush should shrink the poverty gap by securing passage of legislation that lifts low-wage pay above the poverty line. (Currently, about 6.3 percent of all workers, and 11.7 percent of black workers, live below the poverty line.) Increase the minimum wage to at least $6.15 an hour.
And, as part of any tax reduction package, the president should press Congress to further liberalize the Earned Income Tax Credit, to give low-wage workers more disposable income to lift their families above the poverty line. The EITC income ceiling should be raised and taper off more gradually; and families with more than two children should be entitled to a credit for each youngster.
Let’s make work pay, instead of making workers pay.
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