Join Date: Jul 2002
Mentioned: 0 Post(s)
Tagged: 0 Thread(s)
Quoted: 0 Post(s)
|Most taxpayers will receive a $400-a-child check in the mail this summer as a result of the law, which raises the child tax credit, to $1,000 from $600. It had been clear from the beginning that the wealthiest families would not receive the credit, which is intended to phase out at high incomes.
But after studying the bill approved on Friday, liberal and child advocacy groups discovered that a different group of families would also not benefit from the $400 increase — families who make just above the minimum wage.
Because of the formula for calculating the credit, most families with incomes from $10,500 to $26,625 will not benefit. The Center on Budget and Policy Priorities, a liberal group, says those families include 11.9 million children, or one of every six children under 17.
|If we were going to have a tax cut to give $1,000 to all these other kids, there's no reason not to include these kids, too," said David Harris, president of the Children's Research and Education Institute. "Their families are working and playing by the rules and are left out, though it would not have cost too much to include them."|
|The Senate provision that did pass was intended to help those families making $10,500 to $26,625 who do pay federal taxes and could have taken all or part of the $600 credit. The provision, which would have cost $3.5 billion, would have allowed those families to receive some or all of the extra $400 in the new law.|
|"I don't know why they would cut that out of the bill," said Senator Blanche Lincoln, the Arkansas Democrat who persuaded the full Senate to send the credit to many more low income families before the provision was dropped in conference. "These are the people who need it the most and who will spend it the most. These are the people who buy the blue jeans and the detergent and who will stimulate the economy with their spending."|
|Instead, give reductions to those who both need and will spend the money gained. Enact a Social Security tax "holiday" or give a flat-sum rebate to people with low incomes. Putting $1,000 in the pockets of 310,000 families with urgent needs is going to provide far more stimulus to the economy than putting the same $310 million in my pockets.|
|When you listen to tax-cut rhetoric, remember that giving one class of taxpayer a "break" requires -- now or down the line -- that an equivalent burden be imposed on other parties. In other words, if I get a break, someone else pays. Government can't deliver a free lunch to the country as a whole. It can, however, determine who pays for lunch. And last week the Senate handed the bill to the wrong party.|
|Supporters of making dividends tax-free like to paint critics as promoters of class warfare. The fact is, however, that their proposal promotes class welfare. For my class.|
|Delta said~They don't get the credit because they didn't pay the taxes in the first place.
If they got checks, it would be a handout, not a tax credit. And that is a different subject altogether, called welfare.
So, before you accuse mean ol' Bush of trying to starve poor children, please take into account the tax structure here.
|The conference agreement does not accelerate the increase in the credit’s refundability percentage from 10 percent of earnings above $10,500 to 15 percent of earnings above this level. Such an acceleration was part of the Senate-passed bill but was dropped in conference.
For low-income families, the amount of the child tax credit often is limited by the amount of the credit that is refundable. Simply increasing the size of the credit to $1,000 does not increase the amount of the benefit for most of these families.
For example, consider a married couple with two children and $20,000 in income in 2003. Due to the standard deduction and personal exemptions, this family owes no income tax. Its credit is limited to the amount that can be received in refundable form. And that amount is limited to 10 percent of earned income above $10,500. Since the family has $9,500 in income above the $10,500 threshold, it is limited to a refundable child tax credit of $950 in 2003, which works out to $475 per child. In other words, this family is already unable to use the full $600 per child. Increasing the maximum credit amount to $1,000 does nothing for this family; its credit still cannot exceed $950 (10 percent of earnings above $10,500), or $475 per child.
What would have happened to this family if the child tax credit had been increased to $1,000 per child and the increase in the refundability percentage to 15 percent scheduled for 2005 had been accelerated, as would have occurred under the Senate bill? The family’s credit amount would be 15 percent of earned income above $10,500, or $1,425. This family would have received a tax cut of $475, rather than getting nothing.
|Originally posted by noahsmum
Maybe the Dems should've initially agreed upon Bush's first tax proposal and none of this would've happened. Something had to be cut from the tax plan. We made about $20,000 last year, which is beans considering where we live and we paid NO taxes. We actually got $750 through Earned Income Tax Credit for having a child. TAX CUTS ARE FOR PEOPLE WHO PAY TAXES.
|Perhaps the biggest break for business was what did not make it into law. To offset the cost of the tax cut, senators included provisions to crack down on abusive corporate tax shelters, combat some accounting scams such as those pursued by Enron Corp., prevent U.S. companies from moving their headquarters to post office boxes in offshore tax havens such as Bermuda and limit grossly inflated deferred compensation plans for corporate executives.
Last year, at the height of the corporate scandals, such measures appeared unstoppable. But more than a year after Enron's implosion, none of them became law. This time, House negotiators tossed them aside, saying they would not agree to any provisions that could be called tax increases. That came as a relief to business lobbyists who mobilized to kill the measures.
"The things that mattered most were all the things that didn't get in," said a Republican tax lobbyist. "That kind of stuff really matters."
|Originally posted by noahsmum
Maybe the Dems should've initially agreed upon Bush's first tax proposal and none of this would've happened. Something had to be cut from the tax plan.
|But the provision was dropped in the House-Senate conference, where tax writers spent days trying to cram many tax cuts — most prominently, cuts in the taxes on stock dividends and capital gains — into a bill that the Senate said could not be larger than $350 billion.|
|Our overarching conclusion is that the Administration, House, and Senate Finance Committee proposals are seriously flawed and are strikingly removed from the economy's current and long-term problems. Although each of the proposals would provide a short-term economic boost, almost any increase in government spending or cut in tax revenues would stimulate a sluggish economy (assuming the Federal Reserve cooperates). The three proposals on the table, though, would provide their stimulus at an unnecessarily high cost: they would reduce long-term growth, exacerbate looming budget problems, and impose significant burdens on future generations. In addition, they would be regressive and would not only fail to meet their ostensible goal of integrating the personal and corporate taxes, but could also open up new sheltering activity. Better alternatives would include substantial aid to the states, an extension of unemployment insurance benefits, and reform of the alternative minimum tax.|
|The paper focuses on cuts to personal taxes (income and payroll) in the form of rebates, withholding holidays, and acceleration of scheduled marginal rate cuts; it also discusses a state sales tax holiday. Among the business tax cuts that the report examines are proposals related to the alternative minimum tax, the treatment of subpart F income, accelerated depreciation or the expensing of new investment, and investment tax credits. It also assesses the stimulative effects of reducing capital gains taxes. The paper ranks the proposals according to cost-effectiveness--that is, their first-year stimulus "bang" per total budget "buck." It concludes that most of the tax cuts that the report analyzes are unlikely to generate large first-year increases in gross domestic product.|
|The payroll tax and sales tax holidays are likely to have the greatest bang for the buck of the proposals assessed in this report. The delays inherent in implementing the sales tax holiday, however, substantially undercut its likely usefulness as a stimulative mechanism. It is also the smaller of the two proposals for tax holidays in terms of its dollar impact. The bang for the buck of a payroll tax holiday would be reduced if the holiday extended to the employer's share of payroll taxes; that extension would add to the cost of the option without generating a significant increase in consumption. Both of the holiday proposals are uncertain in their effects, with significant downside risks.
Next in ranking by likely cost-effectiveness are the extended EGTRRA rebates and the two marginal investment incentives (partial expensing and the investment tax credit). If the investment tax credit was made incremental, its cost-effectiveness would increase substantially. Again, however, both the rebates and the marginal investment incentives are characterized by significant uncertainty. Advancing the cuts in marginal income tax rates as provided under EGTRRA would have a relatively small bang for the buck because of the option's cost. The remaining incentives--modifications to the tax treatment of subpart F income, repeal of the corporate alternative minimum tax, and reductions in capital gains taxes--would be least likely to generate significant stimulus.
|Originally posted by Marlena
My suspicion, however, is that it's basically irrelevant to Bush and Co. how the cut will affect the immediate economy. Rather, this has merely been his gang's philosophy for years now, and now that Bush & Co. has an opportunity to implement it, they're going for it, no matter what its effects might be.