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And even poorer if possible   For first time in history, Grassley tried 
to avert catastrophe for minimum wage families.


        

*washingtonpost.com* <http://www.washingtonpost.com/>
*Bid to Save Tax Refunds For the Poor Is Blocked*

By Jonathan Weisman
Washington Post Staff Writer
Thursday, September 23, 2004; Page A04

Congressional negotiators beat back efforts yesterday to expand and 
preserve tax refunds for poor families, even as they added $13 billion 
in corporate tax breaks to a package of middle-class tax cuts that could 
come to a vote in the Senate today.

The House-Senate negotiations concluded last night with the approval of 
a five-year $146 billion tax cut, the fourth tax cut in as many years. 
By the end of this week, Republican leaders expect to pass extensions of 
three tax cuts primarily aimed at middle-income taxpayers -- a 
$1,000-per-child tax credit, tax breaks for married couples and a 10 
percent income-tax bracket that was expanded last year.

But the fight over the child tax refunds during the negotiations 
revealed a split among GOP tax writers.

Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) sided 
with Democratic leaders in pushing for changes in the child tax credit 
to ensure that millions of poor families would not see their credits 
shrink or disappear next year.

House Majority Leader Tom DeLay (R-Tex.) and House Ways and Means 
Chairman Bill Thomas (R-Calif.) opposed the move, as did Sens. Don 
Nickles (R-Okla.) and Trent Lott (R-Miss.). That effectively scuttled 
changes to existing law.

The dust-up centers on an obscure provision in the 10-year, $1.35 
trillion tax cut that Congress passed in 2001. That tax cut expanded the 
$500-per-child tax credit to $1,000, but it also made another child 
credit available as a tax refund to some poor families who pay little or 
no federal income taxes.

Such families were allowed to claim a child credit worth as much as 10 
percent of their earnings over $10,000. But the 2001 law stipulated that 
the $10,000 threshold would rise with inflation, effectively slicing 
into or eliminating refunds for families whose income does not keep up 
with inflation. The threshold now stands at $10,750.

Because incomes at the bottom end of the workforce have largely 
stagnated, the rising threshold has had a significant impact, said 
Leonard E. Burman, a senior fellow at the Urban Institute. Of the 11 
million families claiming the child tax refund, more than 4 million -- 
with 9.2 million children -- will see their credit shrink or disappear 
in 2005, Burman estimated.

Grassley and the Democrats argued that the tax package under 
consideration is designed to ensure that middle-class families do not 
see a tax increase next year. So, they asked, why should poor families?

"It's a symbolic point," said Christina Smith FitzPatrick, a senior 
policy analyst at the Women's Law Center. "You're making everybody 
better off except these people at the very bottom."

Grassley backed an amendment by Sen. Blanche Lincoln (D-Ark.) that would 
have severed the link to inflation and set the threshold back to 
$10,000, at a cost to the Treasury of $4.3 billion over five years.

"I am continually astounded that some members of Congress don't 
understand how challenging it is to raise a family in today's economy," 
Lincoln protested. "While the cost of everything from milk to laundry 
detergent continues to rise, tax relief for low-income working families 
decreases."

But other Republicans balked, arguing that the government already helps 
working poor families with the earned-income tax credit and other tax 
rebates.

Nickles told negotiators that the largest tax refund program -- the 
earned-income tax credit -- is already riddled with abuse and mistaken 
payments, and that he did not wish to expand another tax refund program 
until those problems have been sufficiently addressed. House leaders 
have long argued that tax cuts are meant to be relief for taxpayers, not 
added welfare payments for those who do not pay income taxes.

Instead, they focused on a package of 20 expiring business taxes worth 
$13 billion, including a research and experimentation tax credit worth 
$7.6 billion through 2014, a $700 million tax credit for hiring welfare 
recipients, and smaller breaks to help Caribbean distillers, clean-fuel 
vehicle manufacturers, environmental remediation and wind energy, among 
others.

© 2004 The Washington Post Company