NATIONAL — The House of Representatives will vote on a bill that would expand the child tax credit (CTC) for higher income households while allowing a version of it for low-income working families to expire.
The Republican approach would mostly benefit those making over $100,000 a year, while making permanent the low-income provision championed by President Barack Obama and the Democrats would primarily help those making less than $40,000 a year.
Figures in a Citizens for Tax Justice report illustrate that Obama’s plan would save $493 for New Jersey families with income under $40,000, compared to just $55 under the GOP scheme.
However, while the Obama budget does nothing for families making over $100,000, Republicans would give higher income households a $607 tax break.
New Jersey families with income between $40,000 and $100,000 would save $26 under Obama’s budget, compared to $177 under the Republican proposal.
Citizens for Tax Justice estimates that 97 percent of the benefits under Obama’s plan would go to New Jersey families with income under $40,000, with seven percent going to middle-income households.
The GOP proposal would provide three percent of the benefits to New Jersey families with income under $40,000 and 16 percent to middle-income households, while families making over $100,000 would reap 81 percent of the savings.
The CTC provides families with a maximum tax break of $1,000 per child.
It is partially refundable, meaning it can (within certain limits) benefit families who are too poor to have any federal income tax liability even before tax credits are taken into account.
Under a provision enacted in 2009 and extended since then, the refundable part of the credit equals 15 percent of the portion of a family’s earnings that exceed $3,000, up to the $1,000 per-child limit.
If this provision expires as scheduled at the end of 2017, the earnings threshold for the refundable part of the credit will revert from $3,000 to a much higher level ($14,750 in 2018).
The President has proposed, in each of his budget plans since 2009, to make permanent the $3,000 earnings threshold in order to maintain this expansion of the CTC for low-income working families.
One argument for his proposal is that the refundable part of the CTC encourages work because it is calculated as a percentage of earnings and a family must have an employed parent in order to qualify for it.
The House Republican bill, H.R. 4935, would expand the CTC in three ways that do not help the working poor. First, it would index the $1,000 per-child credit amount for inflation, which would not help those who earn too little to receive the full benefit.
Second, it would increase the income level at which the CTC starts to phase out from $110,000 to $150,000 for married couples. Third, that $150,000 level for married couples and the existing $75,000 income level for single parents would both be indexed for inflation thereafter.
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