by Joan Entmacher, Vice President for Family Economic Security
National Women’s Law Center
The House just passed, 263-160, a tax bill that includes an increase in the refundable Child Tax Credit for working poor families. The change would help millions of single mothers working in low-wage jobs—caring for the elderly and young children, cleaning homes and offices, preparing food and waiting tables—who currently get little or no benefit from the Child Tax Credit. But concerns about provisions raising taxes on hedge fund billionaires and multinational corporations could scuttle the bill.
Families who earn less than $12,050 this year are ineligible for the refundable Child Tax Credit. Millions of others receive only a partial credit because the value of the credit is based on the amount of earnings above $12,050. For example, a single mother working 40 hours a week, 50 weeks this year at the minimum wage would earn $12,260 – and she’d receive a Child Tax Credit of just $32 when she files her taxes next year. If her hours were cut back to 30 per week, or she was laid off for a couple of weeks, she’d get nothing.
The bill (HR 6049) would lower the eligibility threshold for the refundable Child Tax Credit to $8,500 for 2008. This would make 2.9 million children in families earning between $8,500 and $12,050 eligible for the credit and increase the credit for 10.1 million families with modest incomes above the threshold.
The improvement in the child tax credit is only a small part of the bill. It also extends various tax provisions previously approved by Congress that benefit businesses and families and create new tax credits to promote alternative energy. Sounds like the kind of bill that should receive overwhelming bipartisan support in Congress, right? Yet, the bill is expected to run into serious trouble in the Senate – and has drawn a veto threat from the White House—because all the tax cuts in the bill are fully paid for.
Most of the tax cuts in recent years have been financed with borrowed money or cuts to vital domestic programs. In contrast, the tax cuts in HR 6049 would be paid for by closing two tax loopholes. The bill would require hedge fund managers to pay tax on deferred compensation in offshore accounts. It also would delay the effective date of tax changes that otherwise would allow multinational corporations to reallocate their interest payments worldwide and reduce the taxes they pay in the United States. (To find out more, read the blog post from our friends at Citizens for Tax Justice.)
The revenue-raisers in HR 6049 would avoid adding to our over $9 trillion national debt. They would help ensure that we have the resources we need to help those in need and invest in our common future. They move toward making multinational corporations and hedge fund billionaires pay their fair share of taxes.
What, exactly, is the problem with that?
The White House explained its veto threat: “the Administration does not believe that efforts to avoid tax increases on Americans need to be coupled with provisions to increase revenue.” That’s nice. Do they believe the tax fairy will make up the lost revenue?
Poor working families lost out last year, when the same improvement in the Child Tax Credit, included in a fair and fiscally responsible bill that extended relief from the Alternative Minimum Tax, was blocked in the Senate because the costs were fully offset by closing tax loopholes exploited by hedge fund managers.
We don’t believe in the tax fairy. But we do want to believe that our leaders in Washington can do better this year.
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