Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser

Posted on: Friday, May 30, 2003

GOP tax cut is not for the working poor

The check will be in the mail soon — unless you're a minimum-wage family.

The tax bill signed by President Bush this week amounts to a bonanza for rich taxpayers while accelerating deficit spending to create a dubious legacy for our children.

But to make the bill more broadly palatable, it contains a few bones for ordinary citizens, notably a mid-year tax refund, to be mailed in late July and early August. The new law raises the child tax credit from $600 to $1,000, and most families will receive a check for the $400 difference for each dependent child.

Never mind that the new tax cut figures to save Vice President Dick Cheney about $100,000 this year. For most folks, $400 for each kid is a welcome budget-stretcher.

For most folks, that is, except minimum-wage families. Republicans in the House-Senate conference committee that produced the final legislation decided the nation couldn't afford to extend the benefits of the 2003 tax cut to families making between $10,500 and $26,625 a year. (Families under $10,500 don't get a child credit because they don't pay taxes.)

Extending the tax credit increase to these families of 11.9 million children, or one of every six children under 17, would have cost $3.5 billion — one one-hundredth of the price tag for the entire 10-year package of tax cuts.

As explained by The New York Times, the gap in the number of families who receive the child credit occurs because of how the formula was arranged in 2001. Congress decided then to give refunds of the credit to low-income families, but just to a maximum of 10 percent of the amount they made over $10,000, or a refund of $600, whichever was lower. The $10,000 amount was indexed to inflation and is now $10,500.

With the credit raised to $1,000, most families won't qualify for the extra amount, because they're still limited to the 10 percent maximum.

The House voted to raise the formula to 15 percent (of income over $10,000), which would have covered the increase to most families. But in a shocking loss of generosity, conferees cut that provision to keep the total tax cut cost under $350 billion.

In fact, the cost of the package will approach $1 trillion when Congress extends the tax-cut features now limited by the so-called sunset provision.

A spokesperson for the Republicans on the House Ways and Means Committee said the lapse for poor families couldn't be helped but, anyway, that the point of the tax cut is to create jobs.

President Bush says it will create 1.4 million new jobs — almost half the number of jobs that evaporated since his last tax cut became law.