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Brady Adams' scaled-back tax break drew only four "no" votes in the Senate. Photo: Michael Olfert |
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Only four states tax poor people more than Oregon, which last year collected tithes from 95,000 Oregonians living below the federal poverty level.
A single mom with two kids who earns $5.50 an hour is eligible for $184 in food stamps and $475 in child-care subsidy per month, resulting in a spendable income of $1,409 a month. If she gets a new job paying $8 an hour, her food stamps will be cut off and her child-care subsidy drops to $336, reducing her spendable income to $1,309 per month.
Under the low-income child-care credit passed by the Legislature last week, you'll have to be 70 percent above the federal poverty level before you get to use the tax credit. |
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Broken Tax Break By David Smigelski, dsmigelski@wweek.com What happens when a Republican banker and a Democratic doctor design a tax break for poor, working families? "You get a program where you have to earn twice the minimum wage to take advantage of it," says Chuck Sheketoff, an anti-poverty activist with the Oregon Law Center. As the 1997 Legislature stumbled to a close last week, Sheketoff and others watched a $100 million tax-relief program he'd crafted three months earlier be scaled back so much that it will no longer help the state's poorest workers, which is what the Legislature set out to do. "It's ridiculous," says state Sen. Ken Baker, who carefully guided Sheketoff's plans through the early stages of the legislative process only to see it hacked nearly beyond recognition last week. "It's stupid." The story of the Tax Break That Broke starts in April, when the Senate Revenue Committee passed Senate Bill 1143, granting $50 million a year in tax breaks and child-care credits for the working poor. The bill addressed a pair of flaws in state law that discourage families from trying to move off welfare and into the job market. First, the measure reduced taxes for people living in poverty. Though the federal government quit taxing poor people in 1986, Oregon is one of 24 states that still does. Second, the state's Employment Related Day-Care Program penalizes low-income parents by slashing child-care benefits as family income increases. As a result, for low-income Oregonians using the state's child-care and food-stamp programs, spendable income goes down as wages rise. SB 1143 would have ended that disincentive by giving poor families refund checks for up to 40 percent of their child-care costs. But that was before politics entered the debate, proving that sometimes, the longer lawmakers work on a problem, the less likely they are to fix it. It's not that the Legislature didn't try to do the right thing, says Baker, chairman of the Senate Revenue Committee. "I think it just flew by people in here, and they don't realize what they did." Under the bill passed by the Senate Revenue Committee in April, poor people would have received $50 million a year in tax breaks, but the program wouldn't have kicked in until 1999. Baker crafted it that way intentionally, he says, to keep the bill out of this year's ugly budget battle and avoid pitting poor people against salmon, schools, parks and roads. The committee passed the bill on April 24, and Senate President Brady Adams--a banker by trade--promptly hugged it to his chest, saying nobody had better play politics with it. On May 1, the bill sailed through the conservative Senate by a vote of 30-to-0. With a vote pending in the more moderate House, it seemed like a done deal: Poor people were going to get $50 million a year in tax breaks starting in 1999. The bill, however, fell victim to good news. The state's May revenue forecast showed the 1997-99 budget would have $140 million more than anticipated. From school boosters to human services advocates, just about every lobby in Salem had an idea of how to use that extra cash. But Adams, who had vowed to keep politics out of the tax-credit debate, suddenly announced he was going to use the extra money to start the low-income tax breaks two years early. He threw SB 1143 aside and crafted a new bill--Senate Bill 388--with the new, earlier implementation date. All of a sudden everyone was against the low-income tax break. School lobbyists whined. Gov. John Kitzhaber--an MD--declared the idea DOA. Even activists like Sheketoff urged Adams not to accelerate the tax cuts. Despite the protests, Adams threw SB 388 into the contentious budget negotiations between the House, Senate and Kitzhaber in the final hectic days of the session. When the sweat-stained mediators emerged, with their agreements in hand, SB 388 was just a shadow of its former self, chopped down by two-thirds and squeezed like a square peg into a round hole. The result is a law that still provides $17 million a year in tax breaks. But the people who get the biggest breaks will be working families earning $10-$12 an hour rather than those scraping by at $6-$7 an hour.For the poorest workers, spendable income will still drop as wages rise. Because of the intricacies of the tax code, nobody will get the full 40 percent child-care credit that the program promises. Sheketoff and others, of course, are free to come back in two years and try again, but to implement a meaningful tax break for 1999, they'll have to compete with all the other special interests. They're doubtful they'll ever pass anything as comprehensive as SB 1143 was before it fell victim to politics. "It's still a model program," Sheketoff says. "But now it's a model of what you don't do. It's a nice credit, but it's going to the wrong people. The people who need it most can't get to it."
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