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House Expands Child Tax Credit

On May 20, the House approved, 271-139, a bill (H.R. 4359) that would make permanent the $1,000 child tax credit that was included in the 2001 Economic Growth and Tax Relief Reconciliation Act (P.L. 107-16). Rep. Jon Porter (R-NV) sponsored the measure.

The 2001 law increased the child tax credit from $500 to $600 in 2003, to $700 in 2005, to $800 in 2009, and to $1,000 in 2010. The credit is refundable for up to 10 percent of the taxpayer’s earned income in excess of $10,500. In 2005, the income level is scheduled to increase to 15 percent. All the provisions of the 2001 law are set to expire on December 31, 2010. At that time, the child tax credit will revert back to $500.

Last year, Congress approved a tax package (P.L. 108-27) that included provisions to temporarily accelerate the implementation of the tax cuts in the 2001 law (see The Source, 5/23/03). Under the law, the child tax credit was immediately increased to $1,000.

H.R. 4359 would increase the amount of income a taxpayer may earn before the credit begins to phase out from $75,000 to $125,000 for single taxpayers and from $110,000 to $250,000 for married couples. The measure also would accelerate to 2004 the 15 percent earned income level.

During consideration of the bill, the House defeated, 187-226, a substitute amendment offered by Rep. Sander Levin (D-MI) that would have permanently extended the $1,000 child tax credit on the condition that Congress enact federal budget legislation that results in a balanced federal budget by FY2014. The substitute would not have increased the income level at which the tax credit begins to phase out. The cost of the substitute would have been offset by applying an additional tax of 2.75 percent for individuals with an annual income above $500,000 and for married couples with an annual income above $1 million.

Rep. Deborah Pryce (R-OH) said that when Congress “accelerated the child tax credit in 2003, 25 million families received checks totaling $14 billion…Imagine what a typical family can do with that kind of money, and $400 is what each typical family would get, a family with one child.” She added, “This bill is an opportunity for parents to spend money on their children, whether it is for a vacation, for an education, for diapers, for groceries, for a swingset. Whatever they want, they will have the money, and they can make the decisions.”

Explaining that young mothers in her district discuss their needs for child care, Rep. Sheila Jackson Lee (D-TX) stated, “I am a proponent of a tax credit; but I believe it should be paid for, and it also has to be reasonable, given to those who can utilize it because they have no other resources. While we are spending $228 billion by putting us further in debt, we are actually not creating child care facilities that can help the thousands upon thousands and millions of parents around the Nation who in fact do not have the ability to have children in their homes, but need the actual facilities which are in fact decreasing by the day because they do not have the resources.”

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