A Tax Break for the Poor Under Fire

By Gus Tyler

Published May 09, 2003, issue of May 09, 2003.
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There are about 19 million Americans who at one time would have been dependent on what is disparagingly called a “handout” but who presently eke out a living at jobs that they normally would not — or could not — take. These millions are the beneficiaries of a law passed in 1975 — a law that made it possible for them to make the transition from dependence to independence.

Prior to the law, many families with dependent children dared not take outside employment. If they did, they would lose the government aid and would not be able to earn enough to keep their heads above water.

What the new law did was to give them an “income tax credit.” In a way it was a rebate on taxes that these very-low-income workers had to pay in the form of the “payroll tax” to cover Social Security and Medicare. How much the family got depended on how many dependents there were. In 2001, the average household credit for such families came to $1,796 for the year, about $34 a week.

It was — and is — not much. But for these marginal working families, it made the difference both in dollars and dignity. It was good for them — and good for America. It added several billion a year to purchasing power — the backbone of our economy.

That program is now imperiled not by an outright assault on the law but by a sneaky procedural device that is bound to drive millions of families out of the program. The headline in The New York Times tells the story: “IRS Tightening Rules for Low-Income Tax Credit.” The reason for the changed rules? To eliminate the cheats.

No one can object to eliminating cheating. But, when the new regulations make it almost impossible for applicants to conform and to do so in a timely fashion, one wonders whether the burdensome procedures are meant to catch the bad guys or to use that pretext to choke a few bad and many more good guys in reams of red tape.

What feeds this suspicion is the failure of the IRS to go after individuals and institutions that are quite wealthy but have for many years escaped paying appropriate taxes. According to IRS estimates, the following are taxes that are avoided, evaded or not paid: Individuals get away with about $132 billion year; offshore accounts escape taxes to the tune of $70 billion. Corporations follow with $46 billion. Partnership investments with $30 billion. That comes to $278 billion. The IRS estimate of overpayment for the income tax credit comes to a measly $6.5 billion to $10 billion.

So, the poor will be sweated by a government that feels indebted to those who have bought their favor with the powers that be.

How does one explain this ethical insensitivity? A would-be wit explains that it all goes back to a president with a penchant for the “ole time religion.” In the Gospel according to Saint Matthew, Jesus says: “Unto everyone that hath shall be given and he shall have abundance, but from him who hath not shall be taken even that which he hath.” Matthew, of course, was talking about the soul that “hath” faith — not money. But the man in the White House may not have known that and so, in cutting the taxes of the rich and in beating down on the poor, he is doing God’s work.

In the long run, however, adds our jokester, the president is condemning his buddies to hell, for, in the same Gospel, Jesus says: “It is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven.”

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