More Tax Cut Details

This is an odd outcome, I must say:

A last-minute revision by House and Senate leaders in the tax bill that President Bush signed today will prevent millions of minimum-wage families from receiving the increased child credit that is in the measure, say Congressional officials and outside groups.

Most taxpayers will receive a $400-a-child check in the mail this summer as a result of the law, which raises the child tax credit, to $1,000 from $600. It had been clear from the beginning that the wealthiest families would not receive the credit, which is intended to phase out at high incomes.

But after studying the bill approved on Friday, liberal and child advocacy groups discovered that a different group of families would also not benefit from the $400 increase — families who make just above the minimum wage.

Because of the formula for calculating the credit, most families with incomes from $10,500 to $26,625 will not benefit. The Center on Budget and Policy Priorities, a liberal group, says those families include 11.9 million children, or one of every six children under 17.

If anything, it is politically stupid, although the fact that many of those individuals don't actually pay income taxes is an issue. And the following provisions do aid low-income families:

The Senate provision that did pass was intended to help those families making $10,500 to $26,625 who do pay federal taxes and could have taken all or part of the $600 credit. The provision, which would have cost $3.5 billion, would have allowed those families to receive some or all of the extra $400 in the new law.

I must say, however, that I am a bit vexed as to how 26K is considered "low income" (although, granted, it depends on where you live in the country). Still, it wasn't that long ago I made something in that range, and we were hardly poverty-stricken. Not to mention that that is about what a school teacher makes.

Of course, the whole problem comes from the insistence on a specific number for the tax-bill, which I have already pointed out is bogus.

the provision was dropped in the House-Senate conference, where tax writers spent days trying to cram many tax cuts — most prominently, cuts in the taxes on stock dividends and capital gains — into a bill that the Senate said could not be larger than $350 billion.

House Republicans, who acknowledged the gap on the child credit, blamed the Senate for insisting on its $350 billion cap, saying the low-income families could have been covered had the Senate been more flexible.

A spokeswoman for the Republicans on the House Ways and Means Committee, Christin Tinsworth, noted that the provision was included in an agreement reached last week by Representative Bill Thomas, Republican of California, the committee chairman, and Senator Charles E. Grassley, Republican of Iowa, chairman of the Senate Finance Committee.

That agreement would have cost $380 billion, but it fell apart when an important swing senator, George V. Voinovich, Republican of Ohio, said he could not approve any bill that exceeded $350 billion. To satisfy him and the Senate, Ms. Tinsworth said, the child credit provision was dropped, along with other costs.

"The Senate preferred to have $20 billion in state aid," she said. "But when we had to squeeze it all to $350 billion, they weren't talking about the child credits. This bill does a lot to help people who need help. But its primary purpose was to generate jobs. Apparently, whatever we do is not going to be enough for some segments of the population."

Source: Tax Law Omits Child Credit in Low-Income Brackets