Jobs, Taxes & Benefits

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Tax-credit taxing if you are too poor to pay taxes

The tax package of 2003, just passed by Congress on May 23, includes an increased child tax-credit of $1000 per child instead of $600. And the government is going to pay the difference right away. Many families will receive a$400-per-child check in the mail this summer.

The rationale behind this tax-credit is, of course, that it is good for families and good for the economy. It provides families with more money that tax writers hope will be spent on goods and services, thereby stimulating the economy.

But, does every family gain from this tax-credit? The answer is no. The members of the conference committee tried to push their party’s agenda, but had to keep to the $350 billion dollar cap over ten years that the Republicans had promised Representative Voinovich. So they did not give the wealthiest families the child tax-credit on the grounds that they are easily able to provide for their children without the government’s help. The tax-credit phases out as it reaches higher income brackets.

Nothing for Poorest Families

However, the poorest tax-paying families will not receive the tax-credit either. This includes families whose incomes range from $10,500 to $26,625. This means that the parents of about 12 million children will not receive the credit. Many of the families in this income range are single-parent families, most of which are headed by single working women.

Families who make less than $10,500 will not receive the tax-credit either. Although some House and Senate proposals included this group because they are the poorest and the most in need of government aid, they were eventually excluded. The argument against giving this group credits is that they do not pay federal taxes.

Immediate Reaction

Democrats immediately criticized the tax package for leaving out America’s poorest families in this way; and now a Republican, Senator Charles Grassley of Iowa, is introducing legislation to extend the child tax credit.

Grassley’s bill expands the tax credit in two ways: it increases the number of families who will receive the credit by including those with incomes of $10,500 to $26,625 and it seeks to make the higher child credit permanent, instead of relapsing back to $600 in 2006. But, because a tax credit does not help people too poor to pay payroll taxes, they do not get a check in the mail.

Do the actual details of the legislation match what we thought when we chose our candidates? Stay tuned. Now that the details of the tax and budget bill are emerging, we will have a better chance to find out what our own representatives believe, what policies they support, and what action they are settling for.

Fight on the Floor- The Nitty Gritty of Politics

Democrats are also attempting to include these low-income families, and quickly. On June 3, 2003 Democrats demanded that the House and Senate consider giving these 9 million families their $400 per-child checks this summer. In the House, Republicans refused to review such bills immediately, so Democrats blocked unrelated Republican-sponsored measures in response. In retaliation, Republicans defeated another unrelated bill –one that proposed to rename a federal building after former Democratic Senator Birch Bayh.

In the Senate, Democratic Senator Blanche Lincoln attempted to pass the tax –credit by attaching it to an energy bill. Then, Republican Majority Leader Bill Frist stopped debate on the energy bill, a move that foiled Lincoln’s plan.

June 3, 2003 was not a day for bipartisanship in Congress. Several bills that are unrelated to the child tax-credit were brought down due to partisan strategy. However, the bills that were blocked in the House will have a second chance, they are allowed to be brought up during a later session.

Original Article Posted on: 6/5/2003

Update - I’ll Give You the Poor if You Give Me the Rich

On June 5, 2003, the Senate voted 94 to 2 in favor of extending the child tax credit to low-income families. But families whose incomes range from $10,500-$26,625 are not the only new additions.

Parents who make anywhere from $110,000 to $150,000 will also receive the $400 per child tax benefit. Even families with incomes as high as $200,000 are eligible if they have several children.

Make it Appeal to the House

Question: Why are upper-income families getting the tax credit too? Answer: To make the bill more likely to pass in the House of Representatives. The bill’s sponsors in the Senate are afraid that it will be defeated in the House, so, at Republican Senators’ suggestion, they added these higher-income families and the families of military personnel who participated in the war in Iraq. The theory is that this will make the bill extra appealing to House Republicans.

How are we Paying for this?

The tax cuts will cost $10 billion over 10 years. Where will we get 10 billion dollars? From higher Customs fees, which will be raised by 10 billion total.

Many legislators in the House of Representatives object to the Customs fee hike. This is the reason that Senate bill sponsors are trying to make them an offer they can’t refuse. If House reps want to give the tax credit to military families, they will have to agree to raising Customs fees, and to the bill itself.

In a Hurry

The Senate is encouraging the House to pass the bill quickly. The bill needs House approval ASAP for the newly-added lower-income and higher-income families get their checks at the same time as the middle-income families included in the bill originally.

Update Posted on: 6/9/2003

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