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Congress Approves Child Tax Credits; Mental Health Parity Provisions Included

On October 1, the Senate passed, 74-25, H.R. 1424, the Emergency Economic Stabilization Act of 2008. The bill includes provisions to expand eligibility for the refundable child tax credit, incorporate the Paul Wellstone Mental Health and Addiction Equity Act (originally H.R. 1424), and authorize $700 billion aimed at stabilizing the economy. The House approved the amended bill, 263-171, on October 3. The House initially approved H.R. 1424 on March 5 (see The Source, 3/7/08).

On September 23, the Senate passed, 93-2, the Renewable Energy and Job Creation Act (H.R. 6049), a related bill that was amended to prevent taxpayers from being affected by the Alternative Minimum Tax (AMT). H.R. 6049 did not comply with the House of Representatives’ pay-as-you-go rules (PAYGO); such rules prohibit any tax changes that would increase the federal deficit. As a result, the House failed to reconsider H.R. 6049 and crafted four separate bills to address the AMT (H.R. 7005), disaster relief for victims of natural disasters (H.R. 7006), mental health parity (H.R. 6983), and extending the tax credits (H.R. 7202). Instead of acting on each of the four bills, H.R. 1424 combined the provisions into the “must-pass” economic stability legislation.

Refundable Child Tax Credit

Under current law (P.L. 108-27), a taxpayer is eligible to receive a refundable child credit equal to 15 percent of earned income above the threshold of $12,050. The legislation decreases that threshold amount to $8,500 beginning in tax year 2009. According to the House Ways and Means Committee report on the previous version of the bill (H.R. 6049), “[t]he committee believes it is appropriate to lower the threshold earnings level for the refundable child credit in order to increase the amount of available child credits for lower income households.”

Current law provides a refundable credit of $1,000 for each qualifying child under the age of 17 through 2010; after 2010, the credit will decrease to $500.

Mental Health Parity 

H.R. 1424 will require insurers that provide coverage for mental health disorders to do so at the same rate at which they cover physical disorders. Parity between mental and physical illness coverage will include co-payments, deductibles, the number of allowed health care provider visits, hospital stay length, and annual and lifetime limits on coverage. The bill will not apply to employers with 50 or fewer employees. Additionally, the bill will not overrule state laws that have more stringent mental health care coverage requirements. 

The Congressional Budget Office estimates the cost of the bill at $4 billion over the next 10 years. The bill’s cost will be offset, as required by the pay-as-you-go rule, by increasing the Medicaid drug rebate rate and prohibiting physicians from referring patients to hospitals in which they have a financial interest.

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