REWARDING WORK AND STRENGTHENING FAMILIES
Expanding the Earned Income Tax Credit (EITC)
President Clinton will call on Congress to pass his $21 billion plan to expand the Earned Income Tax Credit a key part of his opportunity, responsibility, and community agenda to reward work and family. According to estimates by the Department of the Treasury, the Presidentís proposed EITC expansion would deliver tax relief for 6.8 million families, providing up to $1,200 in additional tax relief for some of these hard-pressed, working families. The Presidentís proposal would build on the EITC expansion that he signed into law in 1993 and which provided a tax cut for 15 million families. That expansion made the EITC even more effective at encouraging work and reducing poverty: In 1998, 4.3 million people were directly lifted out of poverty by the EITC more than double the number in 1993. The Presidentís proposal would further increase the reward to work and family by: (1) increasing benefits for families with three children; (2) expanding the credit for married, two-earner couples; (3) rewarding families that are working hard to move into the middle class by lowering the phaseout rate; and (4) encouraging savings through simplification. To illustrate the effects of the Presidentís proposed expansion: under current law, a married couple earning $23,000 and with three kids qualify for a $1,892 EITC; the Presidentís proposed expansion would boost that amount to $2,867 an increase of $975.
Minimum Wage Increase
The President will call on Congress to pass a $1 increase in the minimum wage. Despite the strongest economy in a generation, there are still millions of workers trying to raise a family and make ends meet. The President believes that parents who work hard and play by the rules should not have to raise their children in poverty. That is why, in 1993, he expanded the Earned Income Tax Credit (EITC) and, in 1996, fought for and won a minimum wage increase. A working parent with two children earning the minimum wage in 1993 made $10,559 with the EITC (in 1998 inflation-adjusted dollars) well below the poverty line. As a result of the expanded EITC and higher minimum wage, a similarly situated family in 1998 was above the poverty line making $13,268 a 26 percent inflation-adjusted increase in their standard of living. The Presidentís challenge to build on the success of these policies by raising the minimum wage by $1 would help 11.4 million Americans 70 percent of whom are adults and 59 percent of whom are women. For a full-time, year-round worker at the minimum wage, the Presidentís proposal would mean an additional $2,000 per year, enough to buy 7 months of groceries or pay 5 months of rent.
Ensuring Equal Pay
According to the Department of Labor, the average woman who works full-time earns approximately 75 cents for each dollar that an average man earns. For women of the color, the gap is even wider. This gap is attributable, in part, to differing levels of experience, education, and skill. However, even after accounting for these factors, a significant pay gap still remains between men and women in similar jobs. The President will announce a $27 million Equal Pay Initiative in his Fiscal Year 2001 budget, an increase of $12 million over Fiscal Year 2000. The Initiative requests $10 million for the Equal Employment Opportunity Commission (EEOC) to provide training and technical assistance to about 3,000 employers on how to comply with equal pay requirements and to launch a public service announcement campaign on wage issues. The Initiative also dedicates $10 million for the Department of Labor (DOL) to train women in nontraditional jobs, including high-tech jobs and other skill shortage occupations. Lastly, the Initiative provides $7 million for DOL to help employers assess and improve their pay policies, support public education efforts, provide for projects in non-traditional apprenticeships, and implement industry partnerships. The President also will call on Congress again to pass the Paycheck Fairness Act, which would strengthen wage discrimination laws, provide for new collection of data on wage issues, and provide for additional research, training, and public education efforts on this important subject.
New Housing Vouchers for Hard-Pressed Working Families
The Presidentís budget will include $690 million for 120,000 new housing vouchers to help Americaís hard-pressed working families. These housing vouchers subsidize the rents of low-income Americans, enabling them to move closer to job opportunities many of which are being created far from where these families live. Of the 120,000 new housing vouchers, 32,000 will be targeted to families moving from welfare to work, 18,000 to homeless individuals and families, and 10,000 to low-income families moving to new housing constructed through the Low Income Housing Tax Credit, with the remaining 60,000 vouchers allocated to local areas to help address the large unmet need for affordable housing. These new vouchers build on the 110,000 new housing vouchers secured through the Presidentís leadership over the past two years.
Homeless persons do not participate fully in important health and other programs for which they are eligible. The Presidentís budget proposes legislation for a new $10 million initiative that would improve homeless individualsí access to mainstream programs that will help them move toward self-sufficiency. Demonstration grants would be awarded to several states to improve access to and provide coordination among mainstream programs such as Medicaid, State Childrenís Health Insurance Program (SCHIP), Temporary Assistance for Needy Families, Food Stamps, the Workforce Investment Act, and the Mental Health and Substance Abuse Block Grants. The budget also proposes $1.2 billion for homeless assistance programs at the Department of Housing and Urban Development, including $105 million for 18,000 homeless vouchers.
Millions Move from Welfare to Work
In 1992, President Clinton promised to end welfare as we know it, and now more than three years after the enactment of the welfare reform law, weíve seen revolutionary changes to promote work and responsibility: the number of Americans on welfare is at its lowest level since 1969 -- 30 years ago -- as millions of people move from welfare to work. Since January 1993, the welfare rolls have fallen by more than half, from 14.1 million to 6.9 million. More than 1.3 million welfare recipients went to work in 1998 alone. The 12,000 business participating in the Welfare to Work Partnership launched by the President in 1997 have hired nearly 650,000 former welfare recipients. The federal government is also doing its share: in 1997, the President asked the Vice President to lead the federal hiring initiative to hire 10,000 welfare recipients over four years. Today, weíve far exceeded that goal, hiring more than 16,000 people. At a time when the federal workforce is the smallest it has been in thirty years, the Vice President has shown that you can both create a leaner government and one that leads by example.
New Initiatives to Collect More Child Support
Since the President took office, child support collections have nearly doubled. Today, parents who owe child support have their wages garnished, their bank accounts seized, and their tax refunds withheld. To build on this success, the budget contains several new initiatives to further increase child support collections and crack down on parents who owe child support. Parents who owe past-due child support will have their gambling winnings intercepted and their vehicles booted. They will have a harder time obtaining or renewing a passport, and they can be prohibited from enrolling as a Medicare provider. Finally, the budget will require that child support orders be updated more frequently and increase the amount of child support paid directly to families.
New Fathers Work/Families Win Grants
The Presidentís budget will contain $255 million in new competitive grants in FY 2001 to promote responsible fatherhood and support working families, critical next steps in reforming welfare and reducing child poverty. The Clinton-Gore Administrationís budget will encourage responsible fatherhood through $125 million in "Fathers Work" grants to put approximately 40,000 non-custodial parents (mainly fathers) who owe child support to work and help them connect with their children. As part of this effort, states will need to put in place procedures allowing them to require more parents who owe child support to pay or go to work. The Presidentís budget will also contain $130 million in "Families Win" grants to help about 40,000 low-income parents stay in their jobs, move up the career ladder, and remain off cash assistance. An important part of these grants will be to improve familiesí access to food stamps, health care, child care, and other critical support for working families. $10 million will be set aside for Indian and Native American grantees. Fathers Work/Families Win competitive grants will be run by one-stop career centers, community groups, and faith-based organizations under contract to local and state workforce investment boards.
Helping More Long-Term Recipients Move from Welfare to Work
Because of the Presidentís leadership, the 1997 Balanced Budget Act contained $3 billion for Welfare-to-Work grants to help long-term welfare recipients and certain non-custodial parents go to work and support their children. To fully implement these important efforts, the Presidentís budget allows grantees an additional two years to spend these existing funds.
Second Chance Homes
The budget includes $25 million in new funds to support "second chance homes," adult-supervised and supportive living arrangements, for unmarried teen parents and their children who cannot live at home or with other relatives. States will be able to use these funds, as they can other Social Services Block Grant (SSBG) funds, to support services provided by faith-based and community-based organizations. (Overall, the budget increases SSBG funds by $75 million.) This new initiative will be latest of the Administrationís efforts to reduce teen pregnancy, which have resulted in the lowest teen pregnancy rates on record and an 18 percent decline in teen births from 1991 to 1998.
Helping Low-Income Families Afford Child Care
The Presidentís budget expands the Child Care and Development Block Grant to help working families struggling to afford child care. The Presidentís budget request will increase funding for child care subsidies by $817 million in FY 2001, enabling the program to serve nearly 150,000 more children next year. These new funds, combined with the child care funds provided in welfare reform, will enable the program to serve over 2.2 million children in 2001, an increase of nearly one million since 1997. The block grant is part of the Child Care and Development Fund, the primary federal subsidy program that helps families pay for child care, thereby enabling low-income parents to work. Today, millions of families who are eligible for assistance with their child care costs do not receive any help; in 1999, only about 12 percent of the 15 million low-income children eligible for assistance under federal law, received subsidies.
Tax Relief for Over 8 Million Families with Child Care Expenses
The Child and Dependent Care Tax Credit (CDCTC) provides tax relief to those who, in order to work, pay for the care of a child under 13 or for a disabled dependent or spouse. The Presidentís proposals, which cost $30 billion over 10 years, broaden this tax relief and will help over 8 million families pay their child care expenses:
- Making the Credit Refundable for Nearly Two Million Working Parents. Under current law, a typical family of four with an income under $25,000 is ineligible for credits for child care expenses because it has no income tax liability. Many such families earn too little to claim the credit, but too much to get the full benefit of child care subsidies. To help these families, the President proposes to make the CDCTC refundable for the first time -- so that families with no tax liability can receive up to $2,400 to help offset the cost of child care. This proposal will assist nearly two million families.
- Increasing the Child Care Tax Credit. For families earning up to $60,000, the President proposes to increase the maximum level of the CDCTC from 30 percent to 50 percent. This will provide an average additional tax cut of $249 for these families and eliminating tax liability for nearly all families with incomes below 200 percent of poverty that claim the maximum allowable child care expenses. Under this proposal, a family of four with an annual salary of $35,000, and child care expenses of $3,100, would receive a tax credit of $1,395 -- an increase of $775 over current law. This expansion proposal will help over four million working families pay for child care.
- Providing Tax Relief to Parents Who Stay at Home. The President will also propose enabling parents who stay at home with children under age one to take advantage of the Child and Dependent Care Tax Credit by claiming assumed child care expenses of $500. This proposal will provide an average tax cut of $154, benefiting almost two million parents.
Creating New Child Care Tax Incentives for Businesses
In his budget, President Clinton will also propose a new tax credit for businesses that provide child care services for their employees. These services could include: building or expanding child care facilities, operating existing facilities, training child care workers, or providing child care resource and referral services. The credit covers 25 percent of qualified costs (and 10 percent of resource and referral service expenses), but may not exceed $150,000 per year per business. The Presidentís budget includes $539 million over five years for this tax credit.
Supporting High-Quality Early Childhood Educators
The Presidentís budget includes $30 million to ensure that well-trained professionals are teaching our young children. The Early Childhood Professional Development initiative will provide competitive grants to local partnerships that can pull together universities, local school districts and child care providers. The initiative would focus on equipping early childhood educators with the tools they need to help children develop vital language and literacy skills.
Encouraging the Pursuit of Higher Education by Offering College Campus Based Child Care
To encourage low-income parents to pursue higher education, the Presidentís budget includes $15 million a $10 million increase over last yearís funding level -- to provide an additional 150 college campuses with grants to support the establishment or expansion of child care services. States may also use a share of the Child Care and Development Block Grant for this purpose.
Retirement Savings Accounts To Help Families Save and Invest
The Presidentís Retirement Savings Accounts (RSAs) proposal will give 76 million Americans the opportunity to build wealth and save for their retirement through a progressive tax cut. The Presidentís proposal builds on the successful model of Individual Development Accounts (IDAs), extending generous matches to all low- and moderate-income families to encourage them to develop savings and assets. A person who participated for 40 years in this savings program could accumulate over $266,000 enough to produce $24,000 a year of income in retirement. This proposal would cost $54 billion over 10 years.
Expand Pension Coverage for Small Businesses
In an effort to encourage more small businesses to offer pensions for their employees, the President will also announce a proposal to provide a 50 percent tax credit for qualified contributions to employeesí pensions. This provision would cost $17 billion over 10 years.
Tax Relief for Working Families: Simplifying Taxes and Rewarding Marriage and Work
Today as part of his State of the Union Address, President Clinton will announce his plan to reduce the marriage penalty for married, two-earner couples by increasing the standard deduction by nearly $2,000. The President will propose to increase the standard deduction for two-earner married couples to twice that of single filers, providing substantial tax relief for 9.1 million families. The President would provide an additional $500 increase in the standard deduction for single-earner married couples that do not face a marriage penalty. He would also increase the standard deduction for single filers by $250. The Presidentís plan would cost $45 billion over 10 years and benefit 42.1 million families.
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