TO THE POOR, the most important tax in America right now may be not the gasoline or alcohol or tobacco or even income taxes so much discussed, but the telephone excise tax, which is about to expire. This is a 3 percent federal excise tax on both local and long-distance service, which yields in excess of $2 billion a year and which both houses of Congress have long intended to extend to finance the tax credits for the poor they are considering under the rubric of child care. But the Senate has now put an asterisk on the credits; it would give them for a double purpose in such a way that the poor would get them but not gain from them. The House would play no such game with the money; its way the poor would gain in fact as well as name.
Like so much else, the issue is being fought out in the context of deficit reduction. The Senate included in the big deficit-reducing bill it passed the other day both the extension of the telephone excise tax and the corresponding tax credits for the poor. It did so for various reasons, but one was that it needed the tax credits to make its bill appear progressive -- to make it seem that the bill would take less in percentage terms from people at the bottom of the income pile than from those at the top. In fact, without the child care credits, the Senate proposal, because of the gasoline and other regressive excise tax increases on which it relies, would hit the poorest fifth of the population hardest. The Senate would basically use the child care credits to offset the excise increases; for the poor, the heralded child care subsidy would be a wash.
In the House, instead of the same dollars being counted twice, the poor would be given more dollars. The House deficit reduction plan was kinder to the poor to begin with, in that it contained no gasoline tax increase. There was less regressive effect to overcome, and it was overcome -- for the poorest fifth of the population as a group, if not each household individually -- by increasing the earned income tax credit without reference to the telephone excise tax or child care bill. They were left to be enacted on top of deficit reduction as a plus for the poor.
That's as it should be. The child care bill should not be negated by using it to prettify a deficit reduction plan that harms the very people the child care bill purports to help. Fake budget cuts are bad enough; fake benefits for the poorest people in society take the game too far.