'Operation Offset' - GOP To Target Working Families

by Scott Shields

One of Operation Offset's first targets was the Medicare prescription drug benefit Republicans promised to seniors and then raised their premiums for. Now, it seems that they're going after the working poor. At RedState.org, Representative Marsha Blackburn of Tennessee posted a piece promoting a crackdown on recipients of the Earned Income Tax Credit.

The proposal I announced dealt with the Earned Income Tax Credit. Each year we pay out almost $9 billion to those who don't actually qualify for the credit. Studies found that we could save about $85 billion over 10 years after the enforcement costs were factored in.

Not bad, if the $9 billion figure is accurate. Who could possibly be against going after tax cheats?

To put this in perspective, here's how the Center on Budget and Policy Priorities defines the Earned Income Tax Credit, or EITC.

The EITC reduces tax burdens and supplements wages for low-income working families. Working families with children that have annual incomes below about $31,000 to $37,000 (depending on marital status and the number of children in the family) generally are eligible for the credit. Poor workers without children that have incomes below about $12,000 can receive a very small EITC. In the 2003 tax year, some 22.1 million working families and individuals received the EITC. Among families with children, the average EITC was $2,100.

The EITC is a "refundable" tax credit, which means that if a worker's income tax liability is less than the amount of the credit for which he or she qualifies, the worker receives the remaining amount of the credit as a refund. The EITC was fashioned in part to offset the regressive payroll tax burdens that low-income workers face, as well as income taxes that they may owe.

One of the key goals of the EITC is to "make work pay" -- to reward low-wage work by reducing the taxes that low-wage workers pay on their earnings and by supplementing their wages, and to bring a family with a full-time minimum-wage worker to the poverty line so the family does not have to raise its children in poverty.

So essentially what Republicans like Marsha Blackburn are proposing is auditing poor people. If a single man has no children and makes $11,800 a year wrongly applies for and receives the $2 EITC refund he'd get if he only made $11,700, Blackburn wants to crack down on him. If a married couple with two children and a combined annual income of $35,300 wrongly applies for and receives the $8 EITC refund they'd get if they only made $35,200, Blackburn wants to crack down on them. (Check the numbers for yourself at the EITC calculator.)

Meanwhile, underreporting of corporate income is likely responsible for a loss of tax revenue of at least $30 billion per year. But the IRS is increasingly less likely to target corporations for cheating on their taxes. This is largely due to the expense of pursuing litigation against multi-billion dollar corporations employing armies of lawyers. It's far easier to go after low-income wage earners who can't afford to have their taxes done by H&R Block, much less hire a lawyer. It makes sense with the IRS's enforcement budget having been cut by a third in the last decade.

Perhaps the most ridiculous thing about complaining about waste and abuse of the Earned Income Tax Credit is the fact that so many who are eligible to receive it are not even aware that it exists. Many who are eligible for the EITC have incomes so low that they don't have to file federal tax returns. If they don't file, they don't receive an EITC refund. It's estimated that up to a quarter of those eligible for the EITC don't receive it. If that's accurate, then $12 billion is not being paid out to eligible workers.

It's obvious that Operation Offset isn't about finding real-world answers to the problem of paying for the Gulf Coast recovery. It's about furthering the extreme economic agenda of the Republican Party.