BACKGROUND: The Earned Income Tax Credit (EITC) was designed to reward the working poor by granting a tax refund to about 20 million Americans. The government spends an estimated $25 billion per year on the program, which is available to workers who make less than $29,000 per year.The Senate is proposing to save $42 billion by reducing the number of eligible recipients and the rate of the wage supplement, and the House about $23 billion.

STATUS: The Senate Finance Committee approved cuts in the EITC as part of a major reconciliation bill passed at the end of September, 11-9. The House Ways and Means Committee will consider similar legislation in mid-October.

KEY PLAYERS: Sen. William V. Roth Jr. (R-DE), chairman of the Senate Appropriations Committee, and Sen. Don Nickles (R-OK), are the Senate sponors of the legislation. Rep. Bill Archer (R-TX) is chairman of the House Budget Committee.

PRO: The incentives for the poor to chose work over welfare are often marginal, and the EITC is an effective way to assist and reward those who do. This relatively minor government outlay is worth the message it sends that society notes and appreciates an honest day's work, and encourages people to give up life on the welfare dole.

"This program actually hits the middle class with higher taxes, and transfers that wealth to any and all who can simply meet Federal requirements ... This bill is a good first shot not only at tax reform, but welfare reform. It is fair. It will help promote honesty and restore integrity to what is an important Federal program, while retaining the full program for those most in need." -- Senator William V. Roth Jr. (R-DE)

CON: Republicans are ruthlessly targeting the poor to pay for their drive to balance the budget -- while at the same time they are pushing for a $245 tax cut that would largely affect higher-income Americans. In light of this tax break, their drive to save $20 to $40 billion at the expense of the working poor in simply cold-blooded.

"They want to raise taxes on people at the very bottom so they can lower taxes for people at the very top." -- House Minority Leader Richard Gephart (D-MO)

WHAT'S NEXT: The reconciliation bill moves to the Senate Budget Committee, and then to a floor vote. The House Ways and Means Committee will vote on the EITC before passing it on the the House.

INSIDE SCOOP: This legislation threatens to become lost in legislative swirl of the budget. It is not a particularly fashionable issue to politicians to take a stand on, and the group mainly affected -- low-income workers -- have little or no influential voice in the legislative process. Ironically, Ronald Reagan, the hero of today's Republican conservatives, hailed the EITC in 1986 as "the best antipoverty, the best pro-family, the best job creation measure to come out of Congress."