A Push to Revive Child Tax Aid for Poor

Stung by criticism that the new tax cut law gives short shrift to the working poor, some congressional Republicans pushed Monday for a quick legislative fix to expand benefits for low-income families with children.

Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) said he would introduce a bill today that would provide millions of low-income families the $400-per-child refunds they are not given under the law President Bush signed last week.

A bipartisan group of senators on Monday unveiled a similar bill, which would provide the refunds to families earning between roughly $10,500 and $26,625 a year -- an income bracket that includes some military personnel, sponsors of the measure pointed out.

Refunds for this group of taxpayers were quietly dropped from the tax cut measure as part of final congressional jockeying to keep its total cost at $350 billion.

The omission, spotlighted by liberal interest groups after the bill was signed, upset many lawmakers because it meant that 6.5 million families were denied a benefit made available to higher-income taxpayers. The benefit stems from an increase to $1,000 from $600 in the tax credit families can take for each child.

Strategists for both parties say a move to restore the refunds for the low-income families probably would draw broad bipartisan support -- backed by Democrats who want more aid to lower-income families as well as by Republicans who want more tax cuts overall.

The issue could come to a Senate vote as early as this week. The main sponsors of the measure introduced Monday -- Sens. Olympia J. Snowe (R-Maine) and Blanche Lambert Lincoln (D-Ark.) -- may offer it as an amendment to a pending energy bill.

But the measure could be slowed by wrangling over whether or how to pay for the added benefit -- and by efforts from both parties to propose other changes in the fledgling tax law.

“My concern is that if we start down this road, we’ll find other things that should be tweaked and before you know it, you’ve opened [the whole tax cut debate] back up again,” said a senior aide to Senate Majority Leader Bill Frist (R-Tenn.).

Still, the brewing debate over the child credit suggested that although Bush’s bill-signing ceremony marked the end of the legislative battle over enacting the large tax cut he sought, the political jockeying over its effect has just begun.

Democrats, as they did during congressional debate, are attacking the tax cut law as unfair. Those complaints likely will echo throughout the 2004 campaign.

“This is ‘Alice in Wonderland’ economics,” Sen. Joseph I. Lieberman (D-Conn.) said Monday as he visited Albany, N.Y., seeking support for his presidential candidacy. “Those who need the most get the least. Those who need the least get the most.”

Republicans counter that they would have provided broader tax relief if Democrats had not opposed a bigger overall tax cut. “Some of us in Congress wanted more family tax relief in this package than what we ultimately passed,” Grassley said. “Some Democratic senators who said they wanted extra family tax relief would have voted against the bill, regardless.”

The measure’s fine print came under fresh scrutiny after a report by the Center on Budget and Policy Priorities, a liberal research group, spotlighted the child credit provision.

The new law accelerates the part of the 2001 tax cut measure that gradually increased the child credit. Under the 2001 law, the credit would have reached $1,000 by 2010; under the new law, this increase went into effect retroactively -- as of Jan. 1, 2003. Also, the full credit applies only to couples with an adjusted gross annual income of less than $110,000.

The Senate sought to accelerate the provision in the 2001 law that provided refunds to people who make so little money that they pay no federal income taxes. But that proposal was dropped from the final version.

Democrats charged that its omission showed that Republicans cared more about Bush’s effort to cut taxes on dividends than on providing relief for poorer people. But Republicans said the provision was dropped because of demands by key senators that the bill’s net cost be kept at $350 billion.

The bill by Lincoln and Snowe would restore the refunds and cover the cost by including proposals to shut down some corporate tax shelters.

In discussing the bill, Lincoln noted that the base annual pay for a private in the military is just under $16,000, which would mean that many of the soldiers who fought in Iraq would not benefit from the child credit under the new law.

That was a key factor in winning the co-sponsorship of Sen. John W. Warner (R-Va.), chairman of the Armed Services Committee.

Warner also is backing Grassley’s far broader bill, which would not only restore refunds for the low-income families but also would make the $1,000 credit permanent.

Under the bill signed by Bush, the credit would increase to $1,000 only through 2004, then decrease to $700. Grassley and other Republicans said repeatedly during debate on the tax cut that they intended to extend the higher credit before it expired, and imposed the “sunset” clause only to reduce the measure’s price tag.

Grassley’s bill would cost far more -- up to $80 billion or more over the next decade -- than the $3.5 billion it would take to simply restore the low-income refunds. And unlike the bill by Lincoln and Snowe, Grassley proposes no tax increases to offset the cost, so it would add to the deficit -- a feature that may alienate some potential allies, such as Snowe.