Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, September 23, 1995                   TAG: 9509250042
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-4   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

SENATE GOP CUTS DEEPER INTO TAX CREDIT

Legislation approved by the House Ways and Means Committee on Tuesday would cut $23 billion from the $153 billion earned-income tax credit, which was designed to help the working poor stay off welfare.

The Senate plan will be taken up by the Finance Committee next week in combination with proposals to save $452 billion from Medicare and Medicaid, the federal health insurance programs serving the elderly, disabled and poor.

Senate Republicans would cut the earned-income credit by:

Ending it for illegal aliens and childless workers.

Canceling a scheduled increase for families with two or more children.

Eliminating the credit for workers at the top of the income-eligibility range.

Reducing it for recipients of Social Security, nontaxable pensions and annuities, child support and tax-exempt interest.

``Our reforms are to better focus the program on working poor families and to provide a credit that is fair,'' said Sen. William Roth, R-Del., chairman of the Finance Committee.

Democrats denounced the entire package, including the earned-income-credit component, and contrasted it with Republican plans for tax cuts, such as reducing the rate on capital gains, that benefit the wealthy.

``The GOP proposal is a `SOP,''' said Sen. John Breaux, D-La. ``If you are sick or old or poor, you are in trouble. ... If you are poor, they cut your Medicaid and your earned-income tax credit.''

But Republicans said the program had grown explosively in recent years and was plagued by fraud rates of between 20 percent and 30 percent.

Sen. Don Nickles, R-Okla., called it ``the nation's fastest-growing, most fraudulent welfare program'' and said reforming it was essential to balancing the budget.

``If we don't curb that growth, we are sentencing our children to a debt they cannot afford,'' he said.

Under the Senate plan, the maximum credit for a family with two or more children next year would be $3,208, a $356 cut from current law. The income limit for a small partial credit would be $27,731, $822 lower than under current law.

The maximum credit for families with one child in 1996 would remain the same as under current law, $2,156. But the income ceiling for a partial credit would fall by $1,388 to $23,731.

The liberal Center on Budget and Policy Priorities said roughly 15 million households would be affected by the Senate plan. It said it would be particularly hard on divorced mothers receiving child support because they would have to include the child support in their taxable income for the purpose of figuring the credit. Child support generally is not taxable.