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THE WORKING POOR MAY not expect much from the government, but at a minimum they wish the government would not make their hard lives even harder. But that is what happened in 1983, when a blue-ribbon commission headed by Alan Greenspan decided to "save" Social Security by hoisting payroll taxes to record heights. The employer and employee share of the payroll tax, which in 1960 was 3% each, for a total of $530 for people who worked full time at minimum wage, now stands at 7.65% each for a total of $1,352. Today more than three-quarters of American households pay more in payroll taxes than in income taxes. "We ought to let the working poor keep all their earnings until they reach a higher level of income,'' says Douglas Besharov, resident scholar at Washington's American Enterprise Institute. "But politically, it would be difficult to do, because if we lifted the payroll tax, it would become clear that Social Security is a form of intergenerational welfare.'' Instead, the earned income tax credit was supposed to provide relief. In 1986, when Ronald Reagan expanded the EITC, he called it "the best antipoverty, the best profamily, the best job-creation measure to come out of Congress." But now the Republican budget cutters have EITC in their sights.
Bernice Jackson can't fathom why politicians want to cut the EITC. They can't understand the hardship of a life such as hers "unless you've lived it,'' she says. "They can't just say we need to work harder and things will be fine."
Jackson lives in a small trailer home in Appomattox County, Virginia, with her disabled husband Virgil and their three children. For 17 years she has cooked and cleaned at a training center for mentally disabled adults; she brings home $1,000 a month, while Virgil's disability payments add $560. Credit cards are banned from the house; she is still ashamed of how they ran up a huge debt and had to declare bankruptcy. The creditors were so aggressive they came and demanded her engagement ring and Virgil's wedding band.
This year Bernice received a $1,000 refund from the EITC. Some years she needs the refund for emergency repairs. This time she indulged in a small luxury for herself; she bought a treadmill. "You'd be depressed if you didn't treat yourself sometimes," she reasons. "I work every night, and I still can't make ends meet." She knows that there are people on welfare who are collecting more than she does. "But I believe in earning my way." The family has no savings at all. Son Jodie just graduated from high school, but Bernice couldn't afford to buy his graduation pictures. The mantels are filled with trophies from the daughters' track meets; but it's a struggle to find the cash to send them to the events. "Sometimes I just have to tell my kids they just can't go," she says.
WELFARE VS. WORK