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Earned Income Tax Credits On GOP's Welfare Agenda | Washington Examiner

Republican lawmakers, emboldened by the election of Paul Ryan as House speaker, are intensifying efforts to extend the 1996 welfare reform to other areas of the safety net.

 But before that, they will have to decide where they stand on anti-poverty tax credits backed by President Obama.

 Lifting people out of poverty was one of the few policy goals Ryan cited in his inaugural speech as speaker, along with more widely publicized GOP agenda items such as tax and healthcare reform.

Ryan has taken a special interest in developing viable Republican ideas for aiding the 47 million people whose income fell below the federal poverty line last year. Ryan began working on the issue after being part of a losing presidential ticket in 2012 that was widely criticized as out of touch with downscale voters.

 

After laying out a detailed criticism and a reform plan as House Budget Committee chairman last year, he continued advancing legislative ideas during his stint this year as chairman of the Ways and Means Committee, which has jurisdiction over many federal anti-poverty programs.

Perhaps the most politically significant idea Ryan embraced as part of that effort is an expansion of the anti-poverty earned income tax credit. The credit is refundable, meaning that if it exceeds a family's tax liability, the government sends them a check.

Ryan has proposed expanding the credit for childless adults, putting him on the same page as President Obama. Both would phase in the credit more quickly, boost the maximum credit to $1,000 and lower the eligibility age.

Ryan has touted the credit as an incentive to work, rather than the kind of welfare program that conservatives often worry leads to dependency.

 

But before talking about expanding it, the White House is fixated on extending two low-income tax credits that are set to expire in 2017. One is an expansion of the earned income tax credit to provide relief from a marriage penalty and to boost the benefit for large families, and the other is an enlargement of the child tax credit for poor families. The left-leaning Center on Budget and Policy Priorities estimates that those policies affect 50 million people.

The White House has demanded that those features be extended permanently with a package of business and other temporary tax breaks. The package of 50-plus tax breaks, known as extenders, must be passed before the end of the year for companies to benefit from them.

Ways and Means has approved legislation making permanent certain extenders, such as a provision allowing companies to more quickly write off the cost of investments. If all their legislation were approved, it would represent roughly $1 trillion in lost revenue on paper, according to the Center for a Responsible Federal Budget.

Many Republicans, however, are concerned about expanding anti-poverty tax credits out of concern that they could be abused, especially by illegal immigrants.

Once questions surrounding the earned income tax credit are resolved, the major question for Republicans will be tightening work requirements for welfare programs, partly by rolling back some of the changes Obama has made.

"Work is such a powerful weapon to eliminate poverty," Sen. Tim Scott, R-S.C., said at an event last month hosted by the conservative Heritage Foundation. "We should do everything we possibly can in attempting to restore work" as part of welfare.

Scott, who attributes his own rise out of childhood poverty in part to a Chick-fil-A manager who mentored him about the value of work, said providing credible responses to poverty would be critical to the GOP's success in the presidential election.

Obama attempted to "gut" the federal cash welfare program in 2012 by loosening some work requirements, Scott said, a step that Obama's Republican opponent Mitt Romney criticized during the campaign.

This summer, Republicans on the House Ways and Means Committee introduced eight bills to tighten the work requirements in the Temporary Assistance for Needy Families program, as well as a draft reauthorization of the program, which has been extended on a piecemeal basis during the recent fiscal showdowns between the Obama administration and congressional Republicans.

Many conservatives see defending the 1996 welfare reform, with its work requirements, as the key to moving people into the workforce and out of poverty.

Ryan's recommendations suggested similar reforms to a broad swath of government programs that can create disincentives to work by subsidizing people not to work or causing them to lose benefits if they do. The government spends $750 billion annually on more than 80 means-tested federal programs, of which TANF accounts for less than $17 billion, the Ways and Means Committee estimated last month.

The Congressional Budget Office, Congress' nonpartisan in-house budget experts, released a report in November underlining some of Republicans' concerns that the mix of programs can discourage work. The office calculated what they called effective marginal tax rates, or the share of each dollar earned taken away by the government in taxes or lost eligibility for benefits. They found that one in 10 workers earning 50-150 percent of the federal poverty level face effective marginal tax rates of more than 50 percent.

Yet, as top Republican Ways and Means Committee member Charles Boustany acknowledged last month, fixing some of the biggest anti-work benefits, including Medicaid, will involve working across congressional committees and government agencies, making reform in some ways politically more difficult than the 1996 overhaul. Furthermore, some of the programs that create the biggest disincentives to work, such as Medicaid and Supplemental Security Income, are among the most sprawling and difficult federal programs to change. "But we have to start somewhere," Boustany said.

In particular, food stamp policy, which is directed by the Department of Agriculture, is under the jurisdiction of the Agriculture Committee. Conservatives have expressed concern that changes to the food stamp program made in Obama's 2009 stimulus bill have undermined its work requirements, resulting in the program remaining large even as the recession has abated. About 46 million people received food stamps in fiscal 2015, at a cost of $64 billion.

The result is that many of the policy gurus who the GOP looks to in reforming welfare see reclaiming lost ground and tightening work requirements in TANF and food stamps as the top priorities.

"Yes, you can do it in a range of programs, my own sense is I'd love to see it happen in the mainstream programs first," University of Maryland professor Douglas Besharov told the Ways and Means Committee, referring to TANF and food stamps. "Let's do it there before we get into housing and child care."

 

 

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