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U.S. Sen. Sherrod Brown proposed enhancing Earned Income Tax Credit program for lower-wage workers, and making the program permanent.

(Marvin Fong, The Plain Dealer)

CLEVELAND, Ohio - U.S. Sen. Sherrod Brown was in town Monday lobbying for a bill he introduced that would expand a program giving tax credits to lower-income workers.

His Working Families Tax Relief Act would make the Earned Income Tax Credit program, which is currently only extended to 2017, permanent. The bill seeks to increase the amount low and moderate income taxpayers could receive in refunds, and the legislation would make it easier for single taxpayers without dependent children to qualify for EITC.

Currently it is difficult for single taxpayers without dependent children to get EITC. The bill by Brown, Democrat of Ohio, would also enhance and make permanent the Child Tax Credit.

"This $2- 3,000 (received from EITC) has helped bring millions out of poverty," he said after a news conference Monday at the nonprofit Neighborhood Housing Services of Greater Cleveland in the city's North Broadway neighborhood. "That can be a lot when you're making $19,000-a-year."

Juanalicia Duran agrees. Speaking at the news conference, she said she has used NHS' free tax preparation services, run by volunteers, to receive EITC.

"This is the one time of year, I know I can pay off my bills," she said of the money she received because of EITC. "I live paycheck-to-paycheck.

State Rep. Mike Foley, Democrat of Cleveland, also at the news conference, said this would be the first year Ohio would have its own EITC program. He said residents would be eligible for five percent of what they received from the federal EITC.

The federal EITC, provides the credits based on several factors, including a worker's earnings, martial status and number of dependent children. However, supporters of expanding the program say it is difficult for single workers, especially those without dependents to qualify. The most a single worker can receive is under $500 a year. A working family with three children may be eligible for more than $6,000. Currently working families with at least two children qualify for an EITC equal to 40 percent of the family's first $12,570. Brown's bill would increase it to 45 percent.

Brown introduced the bill in April, but the push to expand EITC when President Barack Obama in his State of the Union address Jan. 28 called for making it easier for single workers to take advantage of EITC. While several Republicans in Congress say they are in favor of the tax credit for the working poor, they believe such enhancements to the program should take the place of raising the minimum wage. A bill before Congress would raise the hourly federal minimum wage to $10.10 from the current $7.25. (The minimum wage in Ohio is $7.95. ) However, Brown - and the president - supports both EITC expansion and raising the minimum wage as part of a larger effort to increase living standards for low-wage workers.

"Who can oppose rewarding work?" Brown said both of expanding EITC and increasing the minimum wage.

Lou Tisler, executive director of NHS, agreed. He said the program was not only good for individuals, but also the local economy. He said the 600 working families who participated last year in in the nonprofit's free tax preparation program, received a total of $1 million through the EITC program. He said his group does the free tax prep because the money working families receive often go back into housing.

"Refunds are commonly used to pay utility bills, pay rent or mortgages and save for the future," he said.

Partisan politics and a broader, philosophical difference between Democrats and Republicans could make Brown's proposal a challenge to pass in a divided Congress.

Brown has 32 co-sponsors for his bill, but the co-sponsors are all Democrats, and it will take at least a handful of Republicans to overcome potential procedural blockades if the bill ever gets to the Senate floor.

And never mind that when Obama brought up EITC expansion, he gave a special nod to Sen. Marco Rubio, a Florida Republican, rather than to Brown or other Democrats. Obama said that "I agree with Republicans like Senator Rubio that it doesn't do enough for single workers who don't have kids. So let's work together to strengthen the credit, reward work, and help more Americans get ahead."

Brown said Monday he didn't feel slighted.

"The president wanted Rubio, and the Republicans, to step up, and do the right thing," he said.

Brown said Rubio and other Republicans have said they support EITC, but they haven't introduced or supported legislation to expand the program.

Rubio indeed says he wants to help more people.

But his approach is different from the one that Obama -- and Brown and other Democrats -- want. A day after Obama's speech to the nation, Rubio went on Michael Medved's syndicated radio show and said he agrees that it is important to help people, but he wants to do it by replacing the EITC with what he called "wage enhancement."

That means, essentially, offering a subsidy for qualifying individuals who live on the cusp of poverty and cannot wait for a refundable tax credit at the end of the year. Rubio also wants to take money that the federal government spends on anti-poverty programs and send it to the states, which he says could develop programs more suitable to their residents' needs.

Rubio, who has shown interest in running for the presidency, has not spelled out the details of his wage enhancement proposal. But it would "allow an unemployed individual to take a job that pays, say, $18,000 a year - which on its own is not enough to make ends meet - but then receive a federal enhancement to make the job a more enticing alternative to collecting unemployment insurance," he explained in a speech on Jan. 8, the 50th anniversary of President Lyndon Johnson's War on Poverty.

"Unlike the Earned Income Tax Credit, my proposal would apply the same to singles as it would to married couples and families with children," Rubio said. The benefit "would arrive in sync with a monthly paycheck rather than a year-end lump-sum credit. And it's a better way of supporting low-income workers than simply raising the minimum wage."

As for Obama's EITC proposal, Rubio told Medved, "I think we've identified the same issue, but his prescription for it seems to be 'more of the same,' and that's problematic."

Also problematic, say Republicans including Rubio and Ohio U.S. Sen. Rob Portman, is excessive fraud and abuse in the EITC program. Portman last week said that while the EITC "is vastly superior to welfare programs that often provide financial incentives to stop working," it nevertheless is wasteful and inefficient.

The federal government has made as much as $132 billion in improper EITC payments over the last decade, Portman said, citing an August report by the Treasury Department inspector general for tax administration.

Brown said the improper payments didn't suggest tax filers were engaging in fraud.

Instead, it may have been a misunderstanding of EITC rules. Many supporters of the program point to the complexity of the program's rules, shown by the IRS publishing a 62-page reference guide, Brown said a common mistake is for divorce parents may both end-up claiming the children, when only one is permitted to do so. Tisler said studies have shown that mistakes are often made by tax preparers, because they have incentive to get larger refunds to increase fees.

The IRS estimated that based on its audits, 21 percent to 25 percent of EITC payments in 2012 were paid in error, according to the report.

On the one hand, that high rate, involving a minimum of $110.8 billion and a maximum of $132.6 billion, reflects an improvement when recent years are compared with those a decade ago. In 2003 alone, improper payments represented a rate of as much as 30 percent, the audit showed.

The IRS acknowledges errors in the program and said its efforts to protect taxpayers in 2012 protected about $4 billion in erroneous EITC payments. And several groups, from the liberal Center of Budget and Policy Priorities to the independent Taxpayer Advocate Service within the IRS, say the EITC overpayment rate may be exaggerated because of sampling errors and recovery efforts, among other things.

Furthermore, the IRS audits are not always correct.

That occurred in 43 percent of such cases in 2002, when the recipients "were entitled to virtually all of the EITC they claimed," said a written statement from Nina Olson, the national taxpayer advocate, to a congressional subcommittee in 2011. "That is, their original audit results did not accurately reflect their eligibility for the EITC."

The inspector general's report nevertheless questioned the IRS's ability to do more.

Supporters also say the EITC problems pale when compared with tax problems involving rent and royalty payments and farm income. Brown said it wasn't just limited to these areas.

"There is significantly more fraud in corporate and business returns and than by the people turning to EITC," he said.

Portman, in a news release and on a website highlighting government waste, said that ten years' worth of overpayments would be "enough to send every family in America a check for $1,000 - or to fund nearly a decade's worth of customs and border security."

How this might affect Democratic efforts to expand the EITC is unclear. Portman, for example, may not be dead set against expansion. Brown said Monday he wants his Republican colleague to support his bill.

Despite his concern about waste, Portman supports the EITC, said his communications director, Caitlin Dunn, "because it encourages work, unlike many other anti-poverty programs. It's also a much more effective way to help low-income working families than raising the minimum wage."

Plain Dealer Washington Bureau Chief Stephen Koff co-authored this report.