Child Tax Credit Gets Boost, Expansion in U.S. House Vote

The Republican-led U.S. House of Representatives voted to increase the child tax credit, including expanded benefits for upper-middle-class parents.

The proposal, passed on a 237-173 vote, would index the $1,000 per child credit to inflation, let people with higher incomes claim the credit and remove a marriage penalty. It would cost the government $115 billion in forgone revenue over a decade and Republicans said it would help families keep up with the increasing cost of raising children.

“The child tax credit has failed to keep pace with costs,” said Representative Lynn Jenkins, a Kansas Republican and the bill’s sponsor. “This legislation essentially removes the annual hidden tax placed on these families and recognizes that a dollar of income in 1998 and 2004 is not the same as a dollar of income in 2014.”

Democrats objected to the plan because it ignores the scheduled 2017 expiration of a child tax credit expansion that benefits the lowest-income households. President Barack Obama’s administration issued a veto threat.

“The new Republican rhetoric on poverty is no match for the deeply troubling actions they have repeatedly taken and continue to take with this legislation today,” said Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee. “This bill leads to harm for millions of low- and middle-income families and their kids.”

Senate Opposition

The plan probably won’t become law because of Democratic opposition in the Senate and from the White House, and because it’s caught in a partisan dispute over tax policy that lawmakers don’t expect to resolve until at least 2015 if at all.

Republicans are adding the bill to a $96.5 billion bill the House passed yesterday that consolidates tax breaks for higher education.

Under current law, parents can claim credits of up to $1,000 per child.

Those benefits start phasing out once parents filing single returns reach adjusted gross income of $75,000 and once married parents filing jointly reach adjusted gross income of $110,000.

Those dollar thresholds and the $1,000 amount aren’t pegged to inflation, which means their value has eroded. The bill would link both to inflation and set the start of the phaseout range at $75,000 for single filers and $150,000 for joint filers.

Wider Group

That’s a benefit to upper-middle-income married couples who currently get reduced credits or none at all. A wider group of families would benefit from the increased size of the credit.

Democrats focused on the bill’s exclusion of any mention of an expiring part of the child credit. Unless Congress acts, at the end of 2017, many low-income families won’t be able to qualify for the refundable portion of the tax credit.

About 6 million children would lose if that law expires, according to the Center on Budget and Policy Priorities, a Washington group that favors policies that benefit low-income families.

House Ways and Means Chairman Dave Camp, a Michigan Republican, called that claim “nonsense” and said it was the Obama administration’s failure to make those breaks permanent. Obama’s budget has called repeatedly for making them permanent.

Republicans also included a provision in the bill that would require a Social Security number for children whose parents benefit from the refundable portion of the credit.

Reducing Fraud

That move is designed to cut down on fraud. In 2010, people without authorization to work in the U.S. collected $4.2 billion worth of credits, according to the Treasury inspector general for tax administration.

That change would yield $24.5 billion in additional revenue, bringing the net budgetary cost of the measure to $90.4 billion over a decade.

“Right now the IRS is providing this refundable child tax credit to those who are here illegally,” said Representative Sam Johnson of Texas, who has supported the measure. “The last thing we need is to encourage folks from Central America to make the dangerous and life-threatening trek to Texas.”

Many Democrats oppose the additional eligibility requirement because they say it would hurt some poor children who are U.S. citizens.

The bill is H.R. 4935. The education bill is H.R. 3393.

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