Posted on 08/21/2003 7:29:06 AM PDT by Tailgunner Joe
“This will be a week from hell for Republicans!” declared House Democrat Leader Nancy Pelosi in July as she led her troops into a procedural battle in Congress. The cause: to protest the pace on expansion of the child tax credit. Rep. Pelosi’s procedural motions were easily defeated by the majority, but the challenge was clear— the Left is going to war on the child tax credit.
The aggressive tactics began almost immediately after Congress passed a version of President Bush’s jobs and growth tax cut package, which increases the existing $600 child tax credit to $1,000. Even better, the package emphasizes getting money into the hands of taxpayers as soon as possible, and orders the Treasury Department to send advance payments to families who qualify for the bigger child tax credit. As a result, families are receiving the $400 increase this summer, rather than having to wait until they file their 2003 returns next year.
The catch: not all families with kids are getting checks. The bill excludes high-income families, and low-income families that don’t have an income tax liability. For example, most families earning $10,500 to $27,000 do not pay enough income taxes to qualify for income tax refunds, and they will not receive $400 checks this summer.
The reason many families don’t qualify is because the Bush 2003 tax cuts completely eliminate all tax liability for three million taxpayers. As a result of this bill and other measures, many lower income working families now pay little or no federal income tax. No income tax payments mean no income tax refunds. Giving an income tax refund to someone who doesn’t pay income taxes is not a refund; it’s a cash payment.
However, with respect to the child tax credit, the principle of “tax refunds for taxpayers” is confusing and easily mischaracterized as deliberately short-changing the poor. Congress quickly realized they left themselves open to political attack, and scrambled to pass an unnecessary bill. The Senate hastily voted 94-2 on June 5th to expand the child tax credit provision for low-income working families. The House then countered with its own 224-201 vote on a much larger expansion. The primary differences-- and they’re big ones-- are that the House bill also expands the credit to higher income families and extends the measure through the decade.
That was the tempest in June and July. The August recess is a chance for Congress to let the dust settle, and to let policymakers reassess the agenda for the fall. Republicans are using this breather to make a very smart strategic move: folding the legislation expanding the child tax credit into welfare reauthorization.
In 1996, Congress sent President Bill Clinton a sweeping, historic welfare reform bill. It made public assistance temporary and declared that cash assistance was no longer an individual entitlement. The idea is that welfare shouldn’t be a payment or an entitlement, but rather a temporary helping hand designed to lift struggling people back to self-sufficiency.
Cash payments in the tax code-- like the expanded child tax credit-- should be considered as part of America’s overall welfare policy. The child tax credit should compete with other funding needs, such as child care for the working poor, health insurance coverage for families that have worked their way off welfare, and strengthening child support collections. In fact, in this scenario, if Congress tries to spend too much on welfare programs, it is possible that welfare reauthorization will face budget hurdles the Senate. That’s good, because it will force Congress to confront the actual welfare policy trade-offs for families that don’t have to pay income taxes. Including the child tax credit in the welfare reauthorization prevents the creation of a stealth new welfare program in the tax code. It also helps shift the child tax credit debate from one about “tax cuts” to more properly one about government assistance to working families.
In thinking about welfare, Congress should also consider the role that all forms of taxation play in keeping people from the workforce. Indeed, Rep. Pelosi was right when she told a press conference on July 23rd, “These [low income] people work hard to provide for their families, and they pay taxes. They do pay taxes. Does anybody here who pays payroll taxes think that that is not paying taxes? Or sales tax, that that’s not paying taxes?”
She’s right, of course, and that’s why Congress passed the Earned Income Tax Credit, another tax code spending program aimed at offsetting the disincentives of the payroll tax. But why does Washington always create new programs to address the problems caused by a high, complicated tax code in the first place?
The fundamental reason is that all of these tax credits bring more money, more decision-making, and more power to Washington, D.C. Instead of demanding new tax credit programs, Nancy Pelosi and her colleagues should propose reducing regressive taxes in the first place. At the federal level, such an agenda includes holding the line against efforts to expand the gas tax, which hits the working poor hardest, and backing Personal Retirement Accounts, which will permit the working poor to improve their Social Security returns and begin building real wealth.
The tax code should not be used as a welfare or income redistribution system. In rolling the child tax credit into welfare reauthorization, Republicans in Congress are doing the right thing in terms of both policy and politics.
How can you get a refund of what you didn't pay in the first place?
If Pelosi's plan holds up, then I'm gonna put in all kinds of paperwork for rebates on products that I didn't buy.
After all, they give the rebates to those who paid! I demand my rights!
There are no shortage of fools who will quickly say that "they pay social security taxes." Well, no they don't pay that either! Thanks to the (un)earned income tax credit, almost all (is not more) of their witholding for social security taxes are returned to them. This is welfare, plain and simple.
No Psycho, the entire Tax Code should be done away with. Blackbird.
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