Child Tax Credit Puts Bush Team on Defensive

WASHINGTON —  One day after President Bush signed one of the largest tax cuts in history, the White House and congressional Republicans were forced Thursday to defend the new law from charges that it will deny low-income taxpayers the refund checks that middle-class taxpayers will soon receive under the child tax credit.

At issue was a Senate-passed proposal that would have cost $3.5 billion, or 1% of the $350-billion final total of the tax cut and spending package.

Had the proposal been in the final legislation, some tax analysts calculate, nearly 12 million children in families with lower incomes -- from $10,500 to $26,625 -- would have received some benefit. Without it, experts say the expanded tax credit, which rises this year to $1,000 a child from $600, will mainly help families with incomes above $30,000 a year.

For instance, the liberal-leaning Center on Budget and Policy Priorities estimates, a married couple with two children and an income below $22,100 will not be eligible for one of millions of refund checks of up to $400 a child that the Treasury Department expects to mail starting in late July.

White House Press Secretary Ari Fleischer blamed the omission on congressional negotiators and said Bush would have signed the bill if it had included the provision.

“There are many decisions that were made that represented compromises in order to get something done,” Fleischer said.

Nonetheless, Fleischer said, the new law would help 25 million families with children. He added: “There are many people who don’t qualify -- because their income levels are too high -- to even get a dollar’s worth of a child credit, and they pay a considerable amount of income taxes.” Under federal law, the credit is phased out for families with an adjusted gross income of more than $110,000.

Democrats charged that the denial of refunds to lower-income taxpayers, first reported in Thursday’s New York Times, proves Bush cares more about the wealthy than the poor.

“Faced with a choice between giving a tax break to an elite few or helping millions of working families, the Republicans once again chose to help their wealthy friends,” said House Minority Leader Nancy Pelosi (D-San Francisco).

Senate Minority Leader Tom Daschle (D-S.D.) also sharply criticized the late revision and urged Bush to “work with Congress to correct this error.”

The proposal to help low-income parents with the child tax credit was driven by Sen. Blanche Lambert Lincoln (D-Ark.), a member of the Senate Finance Committee.

Her $3.5-billion proposal sought to ensure that taxpayers earning above $10,500 a year would qualify for a refund under the child tax credit, even if they owed no income tax. It was not included in the $725-billion tax cut Bush originally proposed in January, nor in the $550-billion cut initially approved by the Republican-led House. But it did pass the GOP-controlled Senate.

Congressional aides said the proposal was still alive in the final days of negotiations. But it was squeezed out when some senators, led by Sen. George Voinovich (R-Ohio), demanded that the bill’s cost be limited to $350 billion. The bill won final approval May 23; the Senate vote was 51 to 50, with Vice President Dick Cheney breaking a tie.

An aide to Rep. Bill Thomas (R-Bakersfield), chairman of the House Ways and Means Committee, said he would have no comment on the matter. Republicans on the Senate Finance Committee, chaired by Sen. Charles E. Grassley (R-Iowa), said in a statement that the new tax law would guarantee at least part of the extra $400 child tax credit to “any taxpayer who pays federal income taxes.” Many in the lowest income ranges, however, do not pay income tax because of deductions and exemptions.

Republicans also noted that lower-income individuals would benefit from an expansion of the 10% tax bracket -- the lowest rate -- to the first $7,000 of income, a $1,000 increase, and from additional aid to government health programs.

Still, at least some Republicans appeared to regret that Lincoln’s provision had been dropped from the bill.

Megan Sowards, a spokeswoman for Sen. Susan Collins (R-Maine), said Collins was “disappointed” at the omission. But Sowards said the issue was not enough to change the senator’s position. Collins voted for the bill.

In the final bargaining, Collins and other influential centrists -- such as Sen. Ben Nelson (D-Neb.) -- were more concerned about ensuring that the bill included a fiscal bailout for states. The new law gives cash-hungry states $20 billion.

Minutes before the final vote, several Democrats lamented on the Senate floor that the bill failed to do enough for children in low-income families. “There evidently was not enough room in this $350-billion tax giveaway to help them,” Sen. Mark Dayton (D-Minn.) said. “They get nothing so the rich get more.”