House approves family tax cuts The child tax credit was raised and the marriage penalty killed. The trouble may start in the Senate.

Posted: March 30, 2001

WASHINGTON — The House of Representatives yesterday overwhelmingly approved a boost in the child tax credit as part of a family-friendly tax bill that would cost $400 billion over 10 years.

The legislation, which passed, 282-144, would increase the child tax credit from $500 to $600 on income earned this year. That means taxpayers with children would see the extra cash a year from now, when they file forms for 2001.

That would amount to nearly $10 billion in immediate tax relief for families with children - a more generous plan than even President Bush proposed because it provides the tax breaks faster. The measure heads to the Senate, where it will face an uncertain fate. The is evenly divided between Republicans and Democrats, and has yet to pass any part of Bush's 10-year, $1.6 trillion tax-cut plan.

Before the House action, Bush told a news conference that Congress was on the way to enacting "meaningful, real, long-lasting tax relief," even though the legislation faces almost certain change in the Senate.

The family tax bill was the second element of Bush's tax plan to pass the House, which already approved his package of $958 billion in across-the-board income-tax cuts.

Meanwhile, a key committee acted on a third aspect. The House Ways and Means Committee voted largely along party lines to approve the estate-tax repeal, which would reduce revenues by $193 billion over 10 years. Several Democratic alternatives were rejected. The GOP delayed repeal for a decade - two years longer than under the President's plan - for cost reasons, since full repeal would cost more than $600 billion. On the floor, Republicans were joined by 64 Democrats in supporting the tax bill. It would eliminate the so-called marriage penalty, which forces married couples to pay more than they would if they filed as singles.

"This is not simply a matter of more tax relief," House Speaker J. Dennis Hastert (R., Ill.) said. "This is a matter of fair tax relief."

Democrats proposed a substitute measure that would have given individual taxpayers an immediate $300 rebate and married couples $600, but it was rejected, 240-194.

The House-passed legislation gives married couples double the standard deduction available to single filers, which for 2001 is $4,550. That means a couple could deduct $9,100 from their income before figuring their taxes, up from the $7,600 they can deduct now.

Another major change is an expansion of the lowest, 15 percent bracket. The first $45,200 in income for a couple is now taxed at 15 percent. With the change, the first $54,100 would be taxed at the low rate. For a single, the first $27,050 is taxed at that rate.

Many Democrats said they opposed the House bill because, in addition to wiping out the marriage penalty, it in effect would award some couples a "marriage bonus" by giving them more favorable tax treatment than if they filed singly. Married couples in which one spouse stays home generally would get the bonus.

In contrast, Bush's plan favors two-income couples, who are the ones most likely to be penalized by the existing tax code. He would allow the lower-income spouse to deduct 10 percent of the first $30,000 in income, up to $3,000, at a cost to the Treasury of $300 billion over 10 years.

Both the House and Bush versions double the per-child tax credit from $500 to $1,000, phased in over six years. However, the House would make the first increment retroactive to Jan. 1, 2001.

On March 8, the GOP-led House voted 230-198, largely along party lines, to cut marginal income-tax rates enough to lower taxes by $958 billion over 10 years. That measure was retroactive to Jan. 1 for certain provisions, a move aimed at reducing the amount of money withheld from paychecks for taxes this year.

The idea of immediate tax cuts is attracting a larger following by the day on Capitol Hill. But Republicans want to tie the quick tax cut to Bush's overall 10-year, $1.6 trillion plan to slash marginal income-tax rates by $958 billion. Democrats do not.

Democrats say the economy, and the tax surpluses it is producing, is too unpredictable to commit to 10 years of tax cuts. They want only the $60 billion stimulus this year, which is about two-thirds of an expected $95 billion surplus in fiscal 2001.

"I feel much more confident about a surplus that we have in hand than I am with 10-year projections," Sen. Debbie Stabenow (D., Mich.) said.

Representativesfrom the Philadelphia area who voted for the bill were Michael N. Castle (R., Del.); James C. Greenwood (R., Pa.); Tim Holden (D., Pa.); Frank A. LoBiondo (R., N.J.); Joseph R. Pitts (R., Pa.); H. James Saxton (R., N.J.); Christopher H. Smith (R., N.J.); Patrick J. Toomey (R., Pa.); and Curt Weldon (R., Pa.).

Voting against the bill were Robert E. Andrews (D., N.J.); Robert A. Borski (D., Pa.); Robert A. Brady (D., Pa.); Chaka Fattah (D., Pa.); and Joseph M. Hoeffel (D., Pa.).

Jackie Koszczuk's e-mail address is jkoszczuk@krwashington.com.

This article contains information from the Associated Press.

Key Elements of House Tax Bill

Marriage Penalty

Beginning next year, the standard deduction for married couples would be raised so that it is equal to twice that of single taxpayers. If in effect this year, the deduction would be $9,100 instead of $7,600 for a couple.

Gradually, from 2004 to 2009, the bottom 15-percent tax bracket would be widened to apply to more of a married couple's income, equal to twice that of singles. If fully in effect this year, the 15-percent bracket would apply to $54,100 of a couple's income, instead of $45,200 under the current law.

Child Credit

The $500 child tax credit would rise to $600 retroactive to this year. The credit would rise to $700 in 2003, $800 in 2004 and $900 in 2005.

SOURCE: Associated Press

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