House Republicans quietly passed yet another tax cut, with a price tag of $115 billion.
Here’s how the Child Tax Credit currently works: Couples receive a maximum credit of $1,000 per-child, meaning they can lower their tax bill by that amount. For instance, a couple with two kids and an income of $50,000 would owe $8,356 in federal income taxes. With the CTC, they would reduce their tax bill by $2,000, to $6,356. However, not everyone is eligible for the credit. Those with income below $3,000 cannot collect it. And for couples, the credit begins phasing out at $110,000 and is entirely phased out at $150,000. For singles, those numbers are $75,000 and $115,000, respectively.
Thus, the current design of the CTC creates a marriage penalty. For instance, imagine a couple where each person makes $60,000. Separately, they would both be eligible to collect the full credit. But combined, their income ($120,000) would exceed the current phase-out threshold for couples filing jointly. Therefore, the couple could maximize their after-tax income by living together, but not marrying.
Now, there’s very little to suggest this disincentive actually has a real-world impact, but House Republicans nevertheless advanced a policy they’ve wanted for years: they made it so that a couple can collect the same tax break, even if they file jointly. The same bill raised the phase-out ceiling to $150,000 and indexed it to inflation. The price tag: $115 billion over the next decade.
What’s wrong with that? If you’re a deficit hawk, quite a bit, but there’s a more glaring concern here: the House GOP measure was structured to punish the poor while benefiting the rich.
On the one hand, we have a new break for the upper-middle class, including households making up to $150,000 a year, which will be indexed to inflation.
Any chance we can also index policies like the minimum wage to inflation? Of course not; that’s socialism.
On other hand, current law on the Child Tax Credit also has a provision that makes more low-income Americans eligible to receive the tax break, but it expires in 2017. What does the new bill from House Republicans do about this? Nothing.:
http://www.msnbc.com/rachel-maddow-show/cutting-taxes-the-wealthy-again