Issue

Once again, Congress faces many difficult choices in fashioning a federal budget for fiscal year 2006. One proposal in the Senate (S 6) could specifically help low income families by maintaining the current $1,000 child tax credit and its refundability (which lets a family get money back beyond their tax liability).

The Bishops’ Conference successfully worked with others to make the child tax credit refundable back in 2001. The credit now enables most taxpayers with children younger than 17 to reduce their taxes by up to $1000 per qualifying child. However, there is a real quirk in the law affecting those who receive the “refundable child credit.” They face a creeping minimum income base that leaves behind too many poor and working families.

Currently, the base earning figure from which the credit is determined is indexed to inflation and rises each year (originally se at $10,000 in 2001 but now up to $10,750 in 2004). This means the first $10,750 that a worker in a low wage job makes is excluded from the child credit formula. Put another way, working families that earn $10,750 or less a year are ineligible for the child tax credit.  A family with a full-time year-round minimum wage worker—40 hours a week for 52 weeks earns $10,700—is, and would remain, ineligible for the credit.

If Congress acts to extend the child tax credit beyond 2010 it should provide access to that credit to every working family with a child. Beyond the broader tax debate, we can stand up for low and moderate income families by asking Congress to remove at least the onerous indexing provisions if not the income floor itself from the refundability portion of the child tax credit.

USCCB Position

The Catholic bishops have been consistent supporters of changes in the tax code to assist families, especially low income families. The Child Tax Credit has been a high priority for the bishops. In their 1991 pastoral statement, Putting Children and Families First, the bishops asserted: "We welcome proposals to reform the tax code to help families cope with the high cost of raising children. These proposals, which have drawn bipartisan support, would allow middle income families with children to keep more of what they earn and would help lift low income families out of poverty.... This pro-work, pro-family provision needs to be enhanced and supported as an important contribution to tax fairness."

What You Can Do

Tell your Senators and Representatives:

• the first priority for tax relief should be families, especially those with the greatest needs.
  
• a fundamental moral measure of this budget is whether it enhances or undermines the lives and dignity of the most vulnerable members of our society.
  
• about stories and experiences of families who utilize the child tax credit.

Email us at sdwpmail@usccb.org
Social Development and World Peace | 3211 4th Street, N.E., Washington DC 20017-1194 | (202) 541-3180 © USCCB. All rights reserved.