Fixing the new tax bill

There were news reports yesterday that the Senate was considering a way to help increse the tax "relief" for the families who make between $10,500 and $26,625 who were initially excluded from the increased earned income tax credit for having children. The plan would have given them access to an expansion in the child-care tax credit that can be paid as a cash refund, rather than just used to offset what taxes they have to pay.

While the initial tax package reportedly left 12 million low-income families out of the child tax credits, this plan would have given up to $400 per child to 6.5 million of those families.

Democrats seized on reports that the 10-year, $350 billion tax-cut package enacted last week deprives many lower-income people of some of its benefits - and provides nothing for others - to renew their attacks on Republicans for what they say is an unfair measure. This time, Democrats have a concrete example, made more politically potent because it involves children.

"People can focus on it because it's one issue and it's so grossly unfair," Sen. Barbara A. Mikulski, a Maryland Democrat, said of the decision not to extend the child tax credit to some lower-income people. Republicans "really poke working families in the eye with what they've done."

The plan is not likely at this point, however, to get passed - because of one man - Tom DeLay. In one of the most callous statements I've heard from a politician in a while (and that's saying something), DeLay dismissed the idea outright.

DeLay said he would not permit legislation making the working poor eligible for the expanded child-care tax credit to come to the House as a separate bill. The tax cut law increased the child-care tax credit to $1,000 from $600 per child.

"They had their chance," DeLay said, referring to legislators who worked on the law. "There's a lot of other things that are more important than that. To me it's a little difficult to give tax relief to people who don't pay income taxes."

The SunSpot explains what the current tax bill offers and some of the plans that have been rushed into Congress to try and rectify some of the problems that have become apparent since the new bill was signed.

Senate action on the measure would be a follow-up to enactment last week of the $350 billion tax-cut and state aid package. That package included an increase, from $600 to $1,000, in the child tax credit, which benefits families with dependent children. The credit is not given to those who earn $110,000 or more a year.

The increase in the child credit was originally scheduled for 2010; the new tax-cut law makes it immediate but sets an expiration date of next year. If Congress does not act to make the increase permanent, the credit would fall to $700 in 2005. But lawmakers are widely expected to make the increase permanent before then.

Also included in the tax-cut package was a provision to make the child tax credit refundable so that some lower-income families who do not earn enough to owe income tax could still receive it. But the provision to widen eligibility for the credit - added by Lincoln before the Finance Committee approved the measure last month - was dropped by House-Senate negotiators before its final passage.

The Lincoln-Snowe measure would restore it and would pay for the change by closing corporate tax loopholes.

While it's good to see that some members of Congress are trying to fix the problems with the bill signed by President Bush, it would have been far better if they had actually managed to prevent the problems from being included in the first place.

Posted by thorswitch at June 6, 2003 01:50 PM | TrackBack