Work and the Earned Income Credit

The very best program for social uplift is a job. With the exception of persons dealing with severe, chronic disabilities, employment must be the central piece in any strategy to overcome poverty.

The basis for the highly successful Earned Income Tax Credit (EITC) initiative is this fundamental belief in the supreme importance of work. Here at Central Dallas Ministries we have encouraged the low-income working men and women that we know to file a tax return to secure this credit. At one point, our public interest law firm secured a grant from the Internal Revenue Service that allowed us to do this work more effectively.

As a tax strategy to reduce poverty and its ill effects on the nation, the EITC was the idea of Richard Nixon, and was signed into law by Gerald Ford in March 1975. The program has received broad bipartisan support from its inception and has been expanded over the years.

The EITC provides a tax refund to all workers in poverty, who earn less than a certain amount annually--regardless of whether they pay income taxes. The EITC is designed to move people aware from federal welfare assistance and into lives of work. Bottom line: the EITC establishes a minimum annual salary for workers. If a worker earns less than the baseline minimum, she or he receives an earned income credit that raises annual earnings to the established minimum.


Ronald Reagan referred to the EITC as "the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress." He increased funding for the effort, as well as the minimum baseline several times. George H. W. Bush expanded the EITC as well.

Senator John McCain has been a consistent supporter of the EITC. Last Saturday (October 18, 2008), the Washington Post reported that, "In fact, in 1999, Mr. McCain opposed efforts to change the earned-income tax credit, which gives payments to the working poor, and called it a 'much-needed tax credit for working Americans.' And in this campaign, he has proposed to use the tax code to do more such 'wealth-spreading."

The Hoover Institute describes the EITC as: "...probably the most cost-effective anti-poverty program the federal government operates."

Using the federal tax code to incentivize work, lift families and promote economic growth is sound policy. The EITC has been supported by leaders from both major political parties. It is an effort that works, while rewarding work!


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Brace yourselves, poor folks. . .one more time

Just about every time the State of Texas decides it's time to "reform" anything related to health and human services, poor folks should prepare to take it on the chin.

That's why the headline in the "Texas & Southwest" section of Saturday's edition of The Dallas Morning News caught my eye: "State plans Medicaid experiment" (Saturday, January 27, 2007, page 3A).

On Friday, Governor Rick Perry, "key GOP lawmakers," and Albert Hawkins, Texas' health and welfare czar, met with U. S. Health and Human Services Secretary Mike Leavitt. No doubt Medicaid financing poses a formidable challenge to the state, given that 25% of the state budget is earmarked for funding the health care delivery system designed to serve the poorest of our residents.

According to the report, the Governor wants to:

• Offer subsidies to small businesses to fund the purchase of health insurance for their employees.
• Give "customized" benefit plans to certain groups of Medicaid patients.
• Transfer part of the funding to "savings accounts" for the patients.

I will reserve judgment until all of the details are revealed and worked through during this session of the Texas Legislature, but I have noted a trend following the announcement of these kinds of plans.

First, the cost involved is often covered by reducing overall benefits to the poor, and sometimes those who need help the most are cut off.

The last time Medicaid was "reformed" in Texas, benefits were cut, people found it harder to be certified and private industry got involved in trying to administer programs. The result to date has been a disaster, and I happened to be in on one of the original planning groups for Accenture, the private company contracted to "improve service and access" to the poor. Hasn't happened.

Second, whenever government begins suggesting private insurance as a remedy for bulging health care costs, I counsel my low-income friends to head for cover!

President Bush's current plan for a health care overhaul includes inducements in the form of tax breaks to motivate more Americans to buy private insurance. According to Dr. Ron Anderson, President and CEO for the Parkland Health and Hospital System, Dallas' public health care institution, the costs associated with these tax breaks would be covered by cuts in funding to hospitals like Parkland that treat the poor and uninsured. Dr. Anderson estimates that under such a plan the loss in Medicaid revenue to Parkland could be up to $83 million annually.

One note of concern for me, as I read the report, is the fact that our Governor asked Secretary Leavitt for "as much leeway as states can be given to tinker with Medicaid." I'd love to know the definition of "tinker" here. One thing I do know, shifting around already limited Medicaid funds never seems to benefit the poor.

I'll stay tuned, but I'm not optimistic.