June 4, 2003
Working poor feel left out of revised child-tax credit
By PAUL M. KRAWZAK
Copley Washington correspondent
WASHINGTON — Dawn Carr, a single mother of three, was excited when Congress recently passed a $330 billion tax cut that she figured would provide her with more money. But when she learned that an expanded child-tax credit within the larger package would not apply to her, it didn’t make sense.
“We’re the people who need it the most,” said Carr, who earned $13,503 last year working at the YWCA in Canton. “We’re the working poor. We’re working hard, and we’re just not getting the things that we need.”
Carr is among an estimated 6.5 million families across the nation that would not benefit from the expanded credit because they are on the lower end of the income scale.
As part of a multifaceted tax cut that President Bush signed last week, Congress increased the child credit to $1,000 per child from $600 per child. The tax cut also accelerates previous reductions in income-tax rates, provides tax relief to married couples and businesses and reduces the tax on dividends and capital gains.
Yet because of the way the law is written, families earning from $10,500 up to $26,625 for a married couple with three children cannot take advantage of the $400 increase in the child credit. These families, often described as the working poor, typically do not pay federal income taxes because they earn so little.
They will continue to receive up to $600 in child-tax credits, but based on a somewhat complicated formula, they will not be eligible for the additional $400 available to more affluent taxpayers.
The Center on Budget and Policy Priorities, a liberal advocacy group, discovered the gap last week. Since then, Democrats have hammered the administration and Republican congressional leaders for excluding the working poor from the benefit.
The tax cut signed by Bush passed with Republican support in the GOP-controlled Senate and House.
As he introduced legislation to extend the benefits Tuesday, Rep. Charles Rangel, D-N.Y., charged that GOP leaders “skimped and trimmed on the few provisions under consideration to help millions of middle- and low-income working families.”
Earlier in the week, Sens. Charles Grassley, R-Iowa, and Olympia Snowe, R-Maine, introduced separate legislation to extend the credit to working families.
The White House has expressed support for the change, although Bush did not include the provision in his initial $726 billion tax-cut proposal.
“We are committed to working with Congress to address it, and the president believes that Sen. Grassley’s proposal is one good idea,” administration spokesman Scott McClellan said.
Efforts to make the change face resistance in the House, where Republican Majority Leader Tom DeLay said the proposal is unlikely to be considered unless it is part of a larger tax cut favored by House Republicans.
Ohio lawmakers support the change.
“It’s a needed modification of the bill we just passed,” said Rep. Ralph Regula, R-Bethlehem Township. Reacting to DeLay’s advocacy of more tax cuts, Regula said, “I’m not sure we’re ready for another big (tax cut) bill.”
Rep. Bob Ney, R-St. Clairsville, said he never heard about the gap until it was reported in the press, but he supports the change and said it “might have a shot’ at getting passed.
Rep. Tim Ryan, D-Warren, called a press conference in his district Monday to express “outrage” over the absence of the benefit.
Sen. George Voinovich, a Republican who is blamed by some for the gap, also supports the change.
Because Voinovich insisted that the tax cut cost no more than $350 billion over a decade, congressional negotiators squeezed out several provisions that were in a Senate version of the tax cut, including one that gave the increased benefit to the working poor.
Without his vote, the tax cut would not have passed the Senate.
Voinovich spokeswoman Marcie Ridgway said Voinovich was not to blame because he could only influence the final size of the tax cut.
Congressional negotiators could have made other changes to end up with a $350 billion bill, she said.
Voinovich favors the Snowe plan, which would pay for the benefit by increasing revenues in other areas.
Robert Greenstein, with the Center on Budget and Policy Priorities, said the provision benefiting the working poor in the Senate version came from Sen. Blanche Lincoln, D-Ark. The GOP leadership only included it because they wanted her vote, and when she ended up opposing the entire bill, negotiators removed it, he said.
Several moderate senators also favored the provision, but when it became clear they would oppose the bill, congressional leaders had no incentive to keep it in the tax cut, he said.