CHN: Senate Passes Bill To Change Inequalities In Child Tax Credit

GOP Leadership Still Negotiating Options for House Version
The Senate passed a bill on Thursday, June 5 to accelerate an increase in the child tax credit for low-income families that had been left out of the recent tax cut legislation signed by President Bush on May 28. The Senate bill (HR 1308) was based on legislation co-sponsored by Senators Lincoln (D-AR) and Snowe (R-ME) and a majority of Senators. It would revise the recently passed tax law by allowing an additional 12 million children of poor, working families (including 1 million children in military families, either active duty or veterans) to receive an average of $150 more under the child tax credit starting in 2003. The new tax law accelerates an already-scheduled increase in the child tax credit to a maximum of $1,000 so that it takes effect in 2003 and 2004. Parents who claimed credits in 2002 will receive advance payments this summer of up to $400 to reflect the increase; but no increase would have been available to families with earnings so low they owe little or no federal income taxes under the new law. The Senate bill corrects this by speeding up an increase for low-income families that would otherwise have taken effect in 2005. In order to ensure the votes needed for passage, proponents of the increase for low-income families agreed also to increase the income level at which the credit begins to phase down for married filers from $110,000 to $115,000 in 2008 and up to $150,000 in 2010. The overall cost of the bill – $10 billion – will be offset by extending customs user fees set to expire this year.

Because revenue bills must originate in the House, the Senate called up a House-passed bill that would provide tax breaks for a variety of businesses and for families of astronauts who die during space missions, deleted the text and added the child tax credit legislation. The Senate then voted 94 – 2 to adopt the amendment to change the text offered by Senator Charles Grassley (R-IA), chairman of the Finance committee, and passed the final bill by voice vote.

The changes adopted in this bill were originally included in the Senate version of the 2003 tax cut legislation. They were then stripped out of the bill during the conference negotiations in a last minute move by Republicans to ensure that the bill was under the $350 billion limit insisted upon by many Senate moderates.

Democrats immediately seized upon this issue to attack the Republican-sponsored tax cut legislation for providing tax breaks for the rich but excluding the most poor and vulnerable citizens. House Minority Leader Nancy Pelosi (D-CA) said, “How do we say to the children of those families: ‘Your parents work, but they don’t make enough money to get this tax credit?’ That is not right. This bill is the least we should do to help America’s working and military families.” All last week, Democrats in both the House and the Senate denounced the Republican tax cut policies through a variety of measures including numerous floor speeches, press conferences, and opposition to non-controversial bills intended to be passed under suspension of the rules in the House.

GOP leaders have yet to settle on a strategy for the House version of the bill. House Republicans could either pass the Senate bill as it is and send it to the White House in an attempt to quickly silence criticism, or, perhaps more likely, they could use the bill to enact a broader package of tax cuts in addition to those enacted just last month.

Democrats are preparing for the possibility that House Republicans might try to add a number of additional tax breaks to the bill, which could create many problems to passing the child tax cut language. “The only barrier to [passage of the bill] that may remain is the insensitivity of the Republican leadership in the House for not allowing it to be brought up as a free-standing bill, so that we can immediately put this matter to rest,” Pelosi said.

Another option the House has been contemplating is making the child tax credit of $1,000 permanent, at a cost of close to $100 billion. This option, supported by Senator Grassley (R-IA), would help insulate Republicans from criticism that they had ignored the needs of low-income working families, but would create many problems in the Senate for fiscal conservatives and deficit hawks, such as Senator George V. Voinovich (R-OH) and Max Baucus (D-MT), who already believe the $350 billion tax cut passed earlier this year was too large. The prospects for passing this child tax credit revision legislation would be greatly hindered.

While the House leadership debates its options, the pressure to act is mounting. In order for those included under this bill to receive their retroactive checks at the same time as families included under the previous tax cut legislation, the bill would have to be signed by the President in the next few weeks. Senator Grassley has stated that he wants to send a bill to the President by June 23. Max Baucus (D-MT), ranking member of the Senate Finance Committee said, “It is imperative that the House act on this bill within two weeks. Otherwise, two sets of checks will have to be sent out. I think that is the height of inefficiency and waste.” It is likely the House will take action on this issue sometime this week.

tax policy