10-07-2000

POLITICS: How 3 Low-Income Families Would Fare Under Bush and Gore Policies

In the fight for the center, Al Gore and George W. Bush have spent a lot
of time bickering over whose proposals would benefit middle-class families
more. But what about lower-income and poor families? How would they fare
under Bush's compassionate conservatism and Gore's new-found
populism?


National Journal selected three families with different incomes-one each
living at 210 percent, 140 percent, and 70 percent of the federal poverty
level-and calculated how each candidate's tax, health care, and child care
proposals would affect them.


1. The first couple, who asked to remain anonymous, live in Baltimore with
their young daughter. The husband, 50, works full-time as a community
worker for Catholic Charities. The wife works part-time as a floral
designer for $6 an hour, earning $6,240 a year. Together, the couple makes
$30,000 a year-slightly more than 200 percent of the federal poverty level
for a family of three. The Earned-Income Tax Credit is just beyond the
family's reach because the income cutoff is $27,413 for working families
with one child. The family, however, is eligible for one $500 child tax
credit.


They have a healthy daughter, who will turn 11 this month. The mother gets
off work in time to pick her up after school. They recently bought their
first home and have paid off their two cars. Upon first glance, the family
seems secure. Yet below the surface, it is struggling to make ends
meet.


Lack of affordable health care is the family's No. 1 problem. Medicaid
covers medical costs for the daughter, but the parents have been without
health insurance for more than 10 years. "Most of the jobs in my
field [human services] are contractual and don't provide insurance,"
the husband explained. "I just can't afford to buy it on my
own."


So far, neither parent has had any major medical emergencies. But even a
minor problem can set them back. Recently, the father felt a fluttering
over his heart and went to the hospital for an examination. "The
doctor at the hospital couldn't find anything, but it cost me $450,"
he says. "Costs like that catch up with you."


Housing costs have also been a major drain on the family's budget. Several
months ago, the ceiling collapsed in one of their bedrooms. Soon after,
the hot water heater broke. Paying to repair them ate up most of the
family's savings.


Yet certain proposals made by Bush and Gore, if enacted, could benefit
this family.


Take taxes. Bush is proposing a 10 percent tax deduction from the income
of a married couple's lower-wage earner. This family would be able to
subtract $624 from its normal taxable income, lowering it to $13,626. Bush
also proposes decreasing the tax rate in that tax bracket from 15 percent
to 10 percent for the first $12,000 in annual earnings. (The remaining
amount would be taxed at the standard 15 percent.) Under such a plan, this
family would pay $1,444 in annual income taxes-$694 less than the $2,138
it would owe under current law. The family could also benefit from Bush's
proposal to double the child tax credit. By claiming the credit, the
family would save an additional $500, bringing their tax bill down to
$944. In total, Bush's proposals could save this family $1,194-assuming
that the Bush plan were fully in effect, even though it is phased in over
five years.


Gore also favors a new deduction for married couples. He proposes making
the standard deduction for couples (now $7,350) twice that of singles (now
$4,400). Such a change would lower this family's taxable income from
$14,250 to $12,800. Under the normal 15 percent tax rate, this family
would pay $1,920 in taxes-$218 less than the $2,138 under current law.
Gore's other major tax proposal-an expansion of the EITC-would still leave
the cutoff beyond this family's reach. Gore's tax proposals overall could
save this family only $218.


Both Gore and Bush have also proposed to help parents purchase health
insurance. Bush is proposing a tax credit that would cover 90 percent of
the cost of annual private health insurance premiums up to a maximum of
$2,000. (The General Accounting Office says that annual premiums for a
family buying health insurance on the private market range from $3,180 to
$14,233 per year). If the Baltimore family could afford to buy the
cheapest policy, at $3,180, they could get a $2,000 tax credit under the
Bush plan. Because they would owe only $944 in tax, the rest of their tax
liability would be erased. They would owe the federal government nothing,
for a total savings of $2,138.


Gore is proposing a health insurance credit, too. His would cover only 25
percent of premium costs, or about $795 of the $3,180 annual premiums that
the Baltimore family might pay. His major proposal to help lower-income
families-an expansion of the Children's Health Insurance Program to
parents-would help families with incomes up to 200 percent of the poverty
level. The Baltimore family, however, would be ineligible because it makes
slightly more than that. Gore's tax and health care proposals would save
this family $1,013 on its annual tax bill.


Overall, the Baltimore family would benefit more from Bush's tax and
health care proposals.


2. But slide down the income ladder and the story changes, especially for
the millions of poor women who are struggling to make the transition from
welfare to work.


In 1997, LaSandra Strickland left the welfare system and began working
full-time as a program operations specialist for SCOPE, a community action
agency in Dayton, Ohio. Today, LaSandra, 30, makes $10.64 an hour. She
pulls in $24,000 annually-140 percent of the federal poverty level for a
family of four. With that money, she supports her three daughters-Amber,
13, Lois, 9, and Diamond, 7. Every now and then a $75 child-support check
arrives in the mail from the father of two of her girls, but such checks
are few and far between.


Each month, LaSandra pays $575 in rent and $285 for utilities, water, and
trash pickup. She also pays $433 for car payments, insurance, and upkeep.
Before and after school, Lois and Diamond attend child care run by Ohio's
Department of Health and Human Services. The cost of care is measured on a
sliding income scale. LaSandra currently pays $160 each month for both
daughters. Amber, the eldest, stays home alone after school.


All three daughters receive health insurance through Ohio's federally
subsidized Children's Health Insurance Program. LaSandra, however, is
uninsured. She estimates that she paid at least $600 out of pocket for
medical expenses last year. "Health insurance is available through my
job, but it's too expensive," LaSandra says. "I basically live
paycheck to paycheck."


Certain Bush proposals could benefit LaSandra. Right now, her taxable
income is $6,350. Under Bush's changes to the tax rate, Strickland would
owe $635-$318 less than the $953 she would normally owe. Such a change
would normally decrease her tax liability and increase the money she would
get back under the federal Earned-Income Tax Credit. But she already
claims $1,500 in child credits for her three daughters, so LaSandra erases
her tax liability altogether. Therefore, Bush's tax rate reduction would
not affect her.


Would she benefit from Bush's proposal to double the child tax credit?
No-under current law, the $500 per child credit already eliminates her
federal tax liability.


The Stricklands, however, would fare much better under Gore's proposed
expansion of the EITC. Gore would increase the maximum credit amount for
families with three or more children by nearly $500 and allow a family
whose income is rising to keep the credit for a slightly longer period of
time. Such changes would raise Strickland's EITC-a payment she gets from
the government at the end of the year-from $1,506 to $2,218, an increase
of $712. However, that increase would eliminate $330 in refunds the family
would receive from the regular child tax credit. So the Stricklands would
gain $382 from the enhanced EITC.


Gore's proposal to increase the Child and Dependent Care Credit could also
help LaSandra pay for child care. The credit allows families to reduce
their income tax liability by a percentage of their child care
expenses-currently 23 percent for a family making $24,000. Under Gore's
proposal, the credit would cover up to 50 percent of child care expenses
for families making less than $30,000. Normally, LaSandra would not be
able to claim this credit, because her tax liability is erased either by
the regular child tax credits or the EITC. But Gore would make the child
care credit refundable, like the EITC. So, LaSandra could receive an extra
cash payment of $960 a year, which is 50 percent of the $1,960 she pays
annually for child care expenses.


If she wanted to get care for Amber, her 13-year-old, LaSandra could also
benefit from Gore's proposal for a new, refundable After-School Tax
Credit. This credit would work like the credit for younger-child care but
would cover children up to age 16 (the Child and Dependent Care Credit
covers children up to age 12).


Bush's proposal to make vouchers for after-school programs available to
low-income families could help LaSandra, too. If she enrolled Amber in an
after-school program, she would be eligible for nearly $800 in
certificates.


Finally, both candidates offer proposals that could help LaSandra get
health insurance. She could automatically get full coverage, with no
premium payments, through Gore's expansion of the Children's Health
Insurance Program to cover parents-which would pay for the $600 she
averaged in out-of-pocket health care costs for herself, and potentially
could be worth far more. Should she choose to purchase private health
insurance, she could cash in on Bush's refundable health credit, which
would cover up to 90 percent of the cost, but could not exceed
$1,000.


Still, the Stricklands would benefit much more from Gore's tax and health
care proposals than from Bush's.


3. Jay Pitsinger, a 53-year-old paraplegic who is confined to a
wheelchair, lives with his wife, Carla, and her two daughters, Hannah, 10,
and Asia, 9, in public housing in Clayton, Ohio.


Up until last year, Jay worked for AmeriCorps. He stopped after the
program ran its two-year course, and he has been unemployed ever since.
Carla used to be on welfare, but was cut off in May after she hit Ohio's
three-year time limit to find work. She worked part-time for the Census
Bureau, but the job was temporary and ended in August.


Since birth, Asia has suffered from a rare disease of the chromosomes that
has resulted in mild mental retardation and a host of medical
problems.


Right now, the family is surviving on Jay's monthly Social Security
disability check and Asia's monthly SSI check-each $500. Their combined
annual income is $12,000-70 percent of the federal poverty level. In
addition, the family receives $150 in food stamps each month. The couple
pays no federal taxes. Major expenses include $160 per month in rent for
their subsidized, three-bedroom home and $100 per month in
utilities.


Medicare and Medicaid cover Jay's medical expenses. Medicaid covers
Asia's. And a county health insurance program, similar to the federal
Children's Health Insurance Program, covers Carla's and Hannah's. So far,
the couple has not needed child care, because one parent has always been
unemployed.


It is difficult to find a single proposal by Bush or Gore that would
affect the Pitsingers.


Because the family has no earned income or income tax liability, it would
not be affected by Bush's proposed tax cuts, tax credits, or vouchers.
Similarly, it would not be affected by Gore's plan to expand the EITC, or
by his child care and health care proposals.


Echoing the ideology behind 1996's welfare reform, both presidential
candidates propose little help for families who are not working.


Megan Twohey

National Journal