House Republicans have been busy pushing for tax breaks that overwhelmingly benefit big corporations. Now they're turning their attention to families — largely by helping wealthy families while letting benefits for poorer ones fall by the wayside.
A House committee passed a $115 billion bill that would extend child tax benefits to higher-income parents, as well as expand some existing education and child tax breaks for lower-income Americans. But the legislation axes a tax break that largely benefits poorer, non-traditional students—and lets another tax benefit for poor families fall by the wayside.
Both Democrats and Republicans want to revamp the way the government hands out tax breaks for education and families with children. But there are major differences over who should benefit and how much assistance is enough.
The House Ways and Means Committee passed a bill this week that would expand the child tax credit to wealthier families, raising the income phase-out level from $110,000 to $150,000 for couples to eliminate what's known as the "marriage penalty." Families with two children who earn up to $205,000 would also become eligible for the tax break, according to an estimate from the Center on Budget and Policy Priorities (CBPP).
The Child Tax Credit was originally passed in 1997 with strong GOP support. It both reduces taxes for families with children and offers a tax refund for certain qualified families. The new GOP bill indexes both the size of the credit and the income thresholds to inflation "to help parents keep more of their hard earned money to use for the mounting expenses of parenting," GOP Rep. Lynn Jenkins said on Wednesday.
Democrats refuse to support the legislation, however, as it fails to extend a 2009 expansion of the Child Tax Credit (CTC) that benefits poor, working families. Before it was passed, families could only receive the refundable part of the CTC if they owed income taxes and earned above a certain threshold. The expansion under Obama, which is scheduled to phase out in 2017, lowered the threshold for the refund to $3,000 and included families with who didn't owe income taxes.
Under the GOP bill, which doesn't continue the 2009 reforms, "a family making $150,000 a year would receive a new tax cut of $2,200 in 2018," estimates the CBPP's Chuck Marr. "Meanwhile, a single mother with two children who works full time throughout the year at the minimum wage and earns $14,500 would lose $1,725."
House Republicans on the committee also passed an education tax overhaul, which Democrats rejected on similar grounds. The $97 billion bill would consolidate a slew of tax breaks for students into a single credit and expand certain benefits for lower-income students. It would make it easier for low-income students to receive a maximum tax refund of $1,500. And it would make all Pell Grant income non-taxable for the first time.
However, the GOP bill also eliminates benefits for students who attend part-time or take more than four years to graduate—a change that would disproportionately affect lower-income Americans. The legislation limits tax benefits to four years and eliminates tax credits for part-time, non-traditional students. That’s prompted the American Council on Education, which represents colleges and universities, to reject the GOP proposal.
“We are concerned that the bill takes away benefits from one set of students— both low- and middle-income, as well graduate students—to pay for aid to a narrower set of low-income students,” the group said in a letter to the Ways and Means Committee. “While the goal to enhance assistance to the neediest students is laudable and certainly a goal we share, we do not believe it should be at the expense of other students and families who may be struggling to invest in a higher education.”
“These cuts to the higher education tax credit and child tax credit take us in the wrong direction,” says Democratic Rep. Lloyd Doggett. “We need to be investing more, not less, in children and in students seeking to better their lives with higher education.”
As with the other tax breaks that the House GOP has passed, neither overhaul is expected to gain traction in the Senate. But lawmakers hope that their efforts will help establish new benchmarks for a broader tax overhaul that both parties say they ultimately want to pass.