06.05.03

Cantwell: Child Care Tax Credit Legislation Helps Families Left Behind by Republican Tax Bill

WASHINGTON, DC – The U.S. Senate today passed legislation that will address a shortcoming in the Republican tax cut bill. Senator Maria Cantwell (D-WA) voted for the measure, which passed the Senate on a 94-2 vote.

"It’s inexcusable that the tax cut package passed last month failed to provide the child tax credit for many working families who need tax relief most. Today’s legislation is an important step in the right direction," Cantwell said. "In particular, it provides tax relief to military families who would otherwise be left behind by the Republican bill."

The legislation, authored by Senators Blanche Lincoln (D-AR) and Chuck Grassley (R-IA), would raise the child tax credit per child for families with annual incomes between $10,500 and $26,625. Under this legislation, families who qualify for the credit would receive a $1,000 per child tax credit, up from the current level of $600. If the House of Representatives approves the Senate bill, these families would receive a $400 check from the IRS.

The legislation would grant these families the same benefit extended to families that make more than $26,625. In addition, the bill would eliminate the marriage penalty relating to the child tax credit. Because the $9.7 billion cost of these changes are fully paid for by an extension of Customs user fees, the bill would have no impact on the deficit.

The legislation also addresses a shortcoming of the last month’s tax bill that places extra hardship on military families. Under the bill passed last month, many military personnel who are fighting in combat zones would not receive the increase in the child tax credit. Because income earned while battling in a combat zone is not subject to income tax, many military families would have had taxable income that is too low to allow them to take advantage of the credit. Therefore, even military personnel making $30,000 or $40,000 would not be able to take advantage of the child tax credit in the bill. According to a 2002 study by the Children’s Defense Fund:

· eight million children younger than 17 live with parents who are on active duty service, are veterans, or have spouses serving in the armed forces;

· one million of those eight million children will benefit this year from the child tax credit provision, which the Republican conference committee eliminated; and

· the families of the one million children will receive an additional $151 per child on average.