CSE Opposes Senate Extension of the Child Tax Credit

Given the Senate’s action last week to expand the child tax credit, you might not realize that the 2003 Jobs and Growth Act completely eliminates federal income tax liability for three million taxpayers and dramatically expands the new ten percent income tax bracket for lower income earners.

Yet the latest Senate action attempts to create $10 billion in new spending. The child tax credit measure included in the new tax cut is designed to provide relief to parents already struggling with a federal income tax burden. Further expanding this provision to parents who do not pay taxes is not a tax cut. Instead, it is new federal spending that will shift the tax burden onto actual taxpayers. Citizens for a Sound Economy opposes the measure.

Further, Congress already created the Earned Income Tax Credit (EITC) for the purpose of assisting the working poor. Given the difficulties the IRS is having administering the EITC, it is a bad idea to further expand the agency’s responsibilities. The IRS overpaid $8.1 billion in EITC in 1999, according to the House Budget Committee, and is now aggressively auditing low-income taxpayers in a massive waste of resources. If Congress wants to do more than the EITC to help low-income families, it should do so through the existing state-managed temporary assistance system, where the aid is part of an overall training and welfare strategy.

CSE President Paul Beckner commented:

“It is typical Senate logic to attempt to provide ‘tax relief’ to those who pay no taxes. These are the same folks who tried to ‘cut’ taxes by raising them in the original tax cut bill. Now they want a stealth new program, and the Senate move only will increase the burden on actual taxpayers.

“The tax code is not a piggy bank. Welfare is best handled by private charity and state welfare agencies, not tax collection agencies. On behalf of the 280,000 members of Citizens for a Sound Economy, I urge the House to hold firm and oppose the Senate’s new spending. Instead of creating new stealth welfare programs, Congress needs to work on making the tax code more simple, fair, low, and honest.”