CHN: Child Tax Credit Improvement Enacted in Financial Rescue Bill
On October 3, its final day in session, Congress passed and the President signed into law a major improvement in the Child Tax Credit that will help 13 million low-income children. The provision makes families with earnings of $8,500 or more eligible for a partial Child Tax Credit although they don’t earn enough to owe federal income taxes (called a “refundable” credit). Approximately 2.9 million children will become newly eligible for the credit and 10.1 million will receive a larger credit. Without the improvement families would have had to earn at least $12,050 in 2008 to be eligible for the partial credit. The reduced earnings requirement was enacted for one year; although advocates have hopes it will not be too difficult to persuade Congress to extend it.
Seventy percent of the children who benefit from the change in the Child Tax Credit live in families in which a parent works 30 or more hours per week year around, and nearly one in ten of the children live in families where either a parent or child has a disability. Many of the parents who would be assisted work in low paying and difficult jobs providing critical services, such as health care to the elderly or ill and teaching young children. For state-by-state estimates of the number of children who will benefit from the Child Tax Credit expansion see the Center on Budget and Policy Priorities report at: HERE..
A tax package which included changes in the Child Tax Credit, an Alternative Minimum Tax (AMT) ‘patch,’ renewal of expiring annual tax credits often referred to as ‘extenders,’ and a number of new tax incentives for the production and use of renewable forms of energy for months had been caught up in a standoff between the House and Senate. House Democrats insisted that the entire cost of the package should be paid for (offset) by raising revenues elsewhere in the tax system. Senate Republicans opposed paying for the AMT and expiring credits; they only supported partially offsetting the remaining provisions. They stymied efforts to bring the fully paid-for House bill, H.R. 6049, to the Senate floor by preventing it from receiving the 60 votes needed to move forward. See Human Needs Report for July 1 for more details.
It looked as though Congress would recess without passing the tax package until the financial rescue bill provided a potential vehicle for passage. After the rescue bill failed in the House, the Senate revised the bill by adding the stalled tax package plus tax benefits for regions of the Midwest, Texas, and Louisiana affected by Hurricane Ike and major flooding. The Senate gambled that the increasing pressures on the House to pass a rescue plan plus the desire by many House members to adopt some or all of the tax cut/disaster relief package would overcome House opposition to the Senate approach. It worked. Ultimately the Emergency Economic Stabilization Act (H.R. 1424) easily passed the Senate by a vote of 74-25 and garnered enough votes in the House (263-171) to become law. The partly offset tax provisions have a net 10-year cost of $110 billion, added to the $700 billion potential price tag for the bailout.