Here is How These Changes Would Increase the Reward to Work for American Families:

THE PRESIDENT’S PROPOSED INCREASE IN THE EARNED INCOME TAX CREDIT

Pre-1993 Law

Current Law

Proposal

Increase

Married*; 2 children; $20,000 earnings

$1,438

$2,524

$2,940

+$416

Individual; 3 children; $15,000 earnings

$2,331

$3,577

$4,116

+$538

Married*; 3 children; $23,000 earnings

$902

$1,892

$2,867

+$975

*Both spouses must earn at least $725 to qualify for the additional credit for a married couple.

DETAILS OF THE PRESIDENT’S PROPOSAL

The President’s Proposal Would Expand the Earned Income Tax Credit to Provide Tax Relief for 6.4 Million Hard-pressed Working Families. The average increase for families with three or more children is $544 and some married couples with three or more children could see as much as an additional $1,155 tax credit. The expansion will cost about $21 billion over 10 years. The four major provisions of President’s EITC expansion are:

Expand the Maximum Credit for Working Families with Three or More Children By $500. The President’s proposal would add a “third tier” to the EITC to expand benefits for families with three or more children. Very low-income families will get 45 cents for every additional dollar they earn -- compared to 40 cents under current law. This higher credit rate will increase the maximum credit for a family with three children in 2001 from $3,992 to $4,491 -- a roughly $500 increase. This proposed new “tier” of the EITC is important because 60 percent of all poor children -- 7.7 million children -- are in families with three or more children. Adding a third tier to the EITC would provide a tax break for 2.1 million low- and moderate-income working families.

Expand the Credit for Married, Two-Earner Couples. The President’s proposal would allow married couples to earn an additional $1,450 more before beginning to have their EITC phased out. For example, in 2001 a married, two-earner couple with children would be able to earn up to $14,480 and still receive the maximum EITC, as compared to the $13,030 threshold under current law. The result of this provision would be to provide an additional $250, on average, for married, two-earner couples. This provision would benefit over 1.3 million married filers.