Here is a letter that Sen. Obama is circulating - or was circulating until Wednesday, November 14th, around the Senate for signatures.
The Honorable Max Baucus
Chairman
Senate Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510
Dear Chairman Baucus:
We write to express our support for protecting recipients of the refundable Child Credit as part of upcoming tax legislation. The credit is important anti-poverty and pro-work tax policy that improves the fairness of the tax code and directs tax relief to children in low-income working families. Significant improvements to the credit were included in H.R. 3996, which was recently reported out of the House Ways and Means Committee. We hope the Senate will follow suit and address the pressing problems with the refundable Child Credit in a fiscally responsible way.
The Child Credit recognizes that raising children is expensive. Whether it is paying for child care, clothing, food, school supplies, or even health care, many working families struggle every month just to make ends meet. Unfortunately, as you know, the current structure of the Child Credit excludes more and more families from the benefit each year. That's because it indexes the income eligibility threshold for inflation, meaning that when low-income families see their incomes stagnate - as many have for the last few years - they also lose part or all of the Child Credit. (The credit is refundable to the extent of 15% of the taxpayer’s earned income in excess of the income threshold.) Thus, just as inflation pushes more and more families onto the Alternative Minimum Tax, it also eliminates or reduces many low-income families’ child tax benefit. If Congress takes no action, it is estimated that over 6 million children in working-poor families will get no benefit from the credit in 2008 because their families’ incomes are too low.
The provision that passed out of the House Ways and Means Committee will lower the income eligibility threshold from approximately $12,050 to $8,500 in 2008, a level low enough to ensure that all families with children that have a full-time minimum wage worker can receive a meaningful benefit (though still not the full credit) . It is estimated that this change would help about 13 million children, all of whom have working parents, and all of whom are low-income. At a time when so many American families are struggling, expanding the refundable Child Credit should be a priority.
We urge you to include a similar provision in any Senate tax bill as a step in addressing the broader goal of equal opportunity for all. If your staff has any questions please have them contact Ian Solomon of Senator Obama’s office at 224-2854.
Sincerely,
This is a complicated issue, and it is the subject of at least three congressional bills that I am aware of.
Some families are too poor to qualify for a child tax credit, which is a deduction you get from the government because it is recognized that raising a child costs money, surprise, surprise. But you only get the deduction if you have to pay a certain amount of taxes; that is, you only get a credit if you make enough money to qualify for it. Therefore, very poor people earn too little to get this benefit.
The reason why it is a bad idea to keep indexing the minimum income necessary to qualify for the credit to inflation is that the wages of most very low-income Americans DO NOT keep pace with inflation. That includes minimum wage workers and those who, because of hardships like disabilities, are unable to work or hold a steady job.Providing low-income tax relief is not only good moral values but also good economic policy. It rewards those who work and create a society of productive human beings who bolster the economy and the general standard of living. Too many taxes and families find that they are better off on welfare. This is thus a progressive "make work pay" incentive which, oodles of evidence shows, works.For more information on how the child tax credit works, here is a paper by a Washington public policy organization that examines issues related to federal budget and tax and low-income programs:
http://www.cbpp.org/11-7-07tax3.htm
Postscript: Here are the final signatories of the letter:
Harkin
Whitehouse
Sanders
Cardin
Kennedy
Lautenberg
Leahy
Dodd
Reid
Feingold
Murray
Boxer
Dorgan
Where is Hillary, who says she cares so much about children and families?
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