Helping the Poor

WHILE massive federal attacks on poverty in the United States aren't likely in today's political and economic climate, poverty itself remains a massive, and deepening, problem. In 1985, the latest year for which statistics are available, 46 percent of the poor in the US paid more than half their income for a place to live, according to the Center on Budget and Policy Priorities, a private research organization in Washington. By contrast, only 4 percent of those above the poverty line ($8,573 for a family of three in '85) used that much of their earnings for a home.

The gap between rich and poor is widening. A study released by the House Ways and Means Committee found that the poorest one-fifth of Americans lost 7.7 percent of their income between 1979 and 1987, while the upper fifth gained 15.8 percent.

So what can be done?

One idea that's winning wide support is greater use of the earned-income tax credit (EITC). The credit is available to any family with children that earned $18,576 or less in the last tax year. It's a refundable credit, based on a set percentage of income, so if a family's tax liability is less than the amount of the credit, the government sends off a check. This arrangement puts added dollars directly in the hands of the working poor.

The EITC began in 1975 as a way to offset regressive payroll taxes and provide an incentive to work. Both conservatives and liberals have praised it as ``pro work'' and ``pro family.'' But it has never been fully used - largely because of unawareness.

That problem is heightened this year, for reasons springing from the tax reform law of 1986: The tax credit is more valuable now; more families than ever (11 million) are eligible for it; and, finally, many of these families owed no income tax and therefore didn't file a return. But if they didn't file, they can't claim the credit.

Hence a national campaign, organized by a coalition of public-policy, civic, and religious groups, to encourage the poor to claim their credits. People have up to three years to file a return and receive the money back from the IRS.

Because of its no-strings-attached nature, the EITC is an efficient means of channeling federal aid to the poor. Some suggest it should be expanded, and thus eliminate the need for other measures designed to help low-income families, such as the minimum wage and child-care subsidies. An expanded EITC would be more effective, however, as part of a larger legislative effort to lift working-poor families above the poverty line, including an increase in the minimum wage and, perhaps, a refundable dependent-care tax credit.

A number of EITC proposals are before Congress - carrying price tags of from $2 billion a year to $5 billion. Under the budgetary compromise between the administration and Congress, the costlier plans will probably have to wait until the revenue picture changes.

An increase in the federal gasoline tax - a levy that hits low-income people proportionally harder - would boost the argument for a larger earned-income credit. But some increase, most likely tied to the number of children in a family, is still possible this year.

Meanwhile, efforts to fully tap the present program deserve broad support.
