Low-Income Tax Break Loses Steam

A bill to expand a tax break for low-income families with children, which just a few weeks ago seemed to have unstoppable momentum, has stalled in Congress.

Efforts to revive the issue fizzled Wednesday when the Senate defeated an attempt to renew debate on a measure that would send checks of up to $400 per child this summer to an estimated 6.5 million low-income families.

The bill has languished in the month since the House and Senate passed different versions of the legislation. Democrats blame the lack of progress toward a compromise on GOP stalling tactics designed to take the steam out of an issue that puts some Republicans on the defensive.

“The Republican plan to bury and prevent passage of [the] bill so far is successful,” said Sen. Max Baucus (D-Mont.).

Some Republicans want to settle the dispute because they fear that allowing it to fester makes their party seem insensitive to the poor. But other Republicans do not see any political urgency and oppose giving tax relief to people who don’t earn enough to owe income taxes.

Senate Republicans huddled Wednesday to discuss how to break the logjam. They emerged with no solution but planned further meetings later this week.

The bill “has been pushed off to the sideline,” said Sen. Rick Santorum (R-Pa.). “Getting that passed in the next two weeks is highly unlikely.”

The stalemate is a striking reversal of fortune for a $10.5-billion tax-relief measure that the Senate approved 94 to 2 in early June.

The bill would extend to low-income people the benefits of a recently enacted increase in the tax credit more affluent families can claim for each of their children. The child tax credit, part of the $350-billion tax-cut package President Bush signed into law in late May, was increased to $1,000 per child from $600.

But the House’s $82-billion version of the bill linked the aid to low-income families to expanded tax breaks for wealthier people. That created a chasm that House and Senate GOP leaders say will be hard to bridge -- especially in the coming weeks, when the higher priority for Congress is reaching final agreement on a measure to provide prescription drug benefits under Medicare.

The impasse over aid to low-income families will not be broken unless Bush weighs in forcefully, say lawmakers familiar with the issue. Several weeks ago, the president told congressional leaders he wanted a final bill passed quickly. But since then, Republicans say, the sense of urgency from White House officials has dissipated.

“They will have to step in and provide a little direction and push if they want this done,” said Gayle Osterberg, a spokeswoman for Sen. Don Nickles (R-Okla.).

Democrats are hoping the legislation gets a boost in late July, when the U.S. Treasury mails the first round of refund checks to the middle-income taxpayers who qualify for the increased child credit. That could rekindle interest in providing a comparable benefit to the low-income families, Democrats say.

The issue was first spotlighted as Bush signed the $350-billion tax-cut package he had sought to stimulate the economy. Democrats and liberal interest groups criticized the measure’s omission of a per-child tax break for families making too little to pay federal income taxes -- those earning from $10,500 to $26,625 a year.

Federal tax law sometimes gives such families direct checks when they do not qualify for tax breaks.

The Senate reacted quickly and passed its bill to provide the aid to low-income people -- and offset the cost by raising customs fees so the bill did not increase the deficit.

The White House initially urged the House to simply pass the Senate bill, but many House Republicans balked. They opposed providing the low-income relief unless it was part of a broader tax-cut bill.

In a key difference, the House bill would keep the per-child credit for all families who qualify at $1,000 through 2010, rather than allowing it to drop to $700 in 2005 as it would under current law. The Senate bill would not change the law.

The overall cost of the House bill makes it a hard sell in the Senate, where several Republicans have insisted that additional tax relief be offset financially so that it does not increase the federal budget deficit .

In the weeks since the House approved its bill, no formal efforts have been made to reconcile the differences with the Senate.

In a bid to keep the issue alive, Senate Minority Leader Tom Daschle (D-S.D.) on Wednesday proposed another vote on it. But Republicans blocked the move on a straight party-line vote, 51 to 45.

Democrats said they plan other efforts to pressure Republicans to reach a compromise on the tax-break issue. But Republicans said that such attempts may be counterproductive. “This is a blatant political maneuver,” said Sen. Trent Lott (R-Miss.).