One of the inequities of the 2001 tax act, insofar as the rich are concerned will be cured by a Bill passed by the House of Representatives before leaving on their third vacation this year, if approved by the Senate. Among provisions in the 2001 tax act that did not benefit the rich was the $1,000 per child tax credit which provides in part that a family with children gets a tax credit of up to $1,000 per child.
The credit is tied to income levels. Those with high incomes and those with low incomes do not get the benefit. At first blush that may seem like a good thing since not only were there a number of tax breaks that primarily benefitted the rich, but the provision represented one of the few instances where the tax code treated the rich and the poor alike. Thanks to the House’s recent actions, treatment of the quite rich and the poor will, if the Bill is approved by the Senate, be separated. The quite rich will find this to their liking since they always welcome additional tax breaks and see it as their just desserts for contributions made by them to society, contributions not always obvious to the rest of us.
Under the 2001 act, the child tax credit was not available to families with incomes in excess of $149,000 and less than about $10,300. The House bill provides that the credit will be available in whole or in part, depending on the number of children in a family, to those with income of up to $309,000. Some might think that is a change of little moment since fewer than two percent of Americans earn more than $250,000 a year. That approach overlooks the fact that two hundred fifty thousand dollars today is not the same as it was 10 or 20 years ago and for that reason, if none other, extending the benefit to more of the wealthy makes sense. Under the House Bill, over the next ten years families with two children and incomes between $150,000 and $250,000 will get $22,000 in tax credits. Families with incomes between $250,000 and $309,000 will get lesser but not insignificant amounts depending on the size of their families.
Making the child tax credit more inclusive will, according to the Tax Policy Center, cost only $69 billion through 2014, a small percentage of the overall government spending that will take place during that period. If passed by the Senate, that legislation (which also makes the child tax credit permanent) goes a long way toward curing the problems with the 2001 act. Because the House is mindful of the less fortunate, those at the other end of the income scale will also be helped.
A two-child family with an income of $12,000 has been receiving a child tax credit of $125 per child. That amount was scheduled to increase next year. Under the proposed law, that family will not have to wait a year. Although not easy to fathom in detail, part of the House bill moves the increase up to this year resulting in an apparent one time benefit to that family of $300.
As the foregoing demonstrates, almost everyone benefits from the new provisions. The only exceptions are those earning less than the minimum wage of $10,300 who pay no taxes. They get nothing since they pay no taxes. David Harris, president of the Children’s Research and Education Institute estimates that about eight million children are in families who will get no tax credit. The message of those children to their parents should be “Go out and get a (better paying) job.” The eight million omitted children are offset in part by the children in the 2.1 million families earning at least 15 times more than the minimum wage who will now become eligible to participate in the child tax credit.
It is not yet clear that the Senate will go along with the House. Former exterminator and now majority leader in the House, Tom Delay is annoyed at that. “I can’t believe that one or two members, particularly Republican members of the Senate, would hold up such an incredible budget. For what? To make it more difficult to give tax relief to the American public.” Explaining why she voted for the House bill, Rep. Nancy Johnson, R. Conn., a typical example of a compassionate Republican legislator, said: “This is about children. It’s about families. It’s tough to raise a family today.” The parents of the eight million omitted children would surely agree.
CHRISTOPHER BRAUCHLI is a Boulder, Colorado lawyer. His column appears weekly in the Daily Camera. He can be reached at: brauchli.56@post.harvard.edu
