CBSN

House Republicans Amend Tax Cuts

tax, taxes, income
AP
Bending under political pressure, House Republicans voted narrowly Thursday to extend child tax credits through the end of the decade while preventing low-income families from cashing in this year on rebates going out to other households.

The 221-204 vote on a package of $82 billion in new tax cuts – none of them paid for – sets up a confrontation with the Senate, which a week ago passed a much smaller bill to allow 6.5 million minimum-wage households to qualify for checks of up to $400 per child being mailed to middle-income parents.

The House also removed from a Senate-passed bill language that would have enabled families of servicemen and servicewomen who served in the war with Iraq to claim bigger child tax credits.

Republicans said the low-income families covered in the legislation already pay no income taxes. "We're turning our tax code into a welfare system," said Spencer Bachus, R-Ala.

The White House said Thursday it wanted the House and Senate to "quickly resolve their differences." But Republicans in the two chambers have veered far apart in their response to the political pressure for an expansion of child credits to more low-income families.

Democrats said the House GOP's changes will trigger endless negotiations and kill any chance that low-income families would get checks similar to those going this summer to 25 million middle-income parents.

"I don't think it's ever going to happen," said House Minority Leader Nancy Pelosi, R-Calif.

The pressure started after President Bush signed a tax cut that increased the $600 child tax credit to $1,000. It authorized the Treasury Department to send advance refunds worth up to $400 per child to families who qualify for the bigger credit. The checks will start to go out at the end of July.

But families making between $10,500 and $27,000 do not pay enough income taxes to take advantage of the bigger credit and would not get a refund check this summer.

The Senate responded to the omission with a quick fix that would send rebates to low-income families later this year. Low-income families could claim payments worth 15 percent of their income over $10,500, up to $1,000 per child. The Treasury Department said it couldn't send a second round of checks until September.

The House rejected the Senate's solution and drafted a bill that includes the bigger credits for low-income workers but does not make any provision for the families to get rebate checks this year. Those families would have to claim the bigger credit when they file their taxes in 2004.

House Ways and Means Committee Chairman Bill Thomas said, "Obviously that would be one of the issues" when the House and Senate meet to hammer out their differences.

The House bill contains a broad expansion of the child credit, carrying the increase to $1,000 through the end of the decade. The credit would drop to $700 in 2006 if left unchanged.

The House also gives wealthier married couples a bigger credit, allowing couples who make $150,000 or more to claim part of the credit. It currently starts to disappear for couples who make $110,000 or more.

The vastly different approaches taken by the House and Senate set up a fight between the party's deficit watchdogs and its most ardent tax-cutters.

Moderates in the House and Senate said they prefer the Senate's small bill, which costs the Treasury nothing because the tax cuts are paid for with an extension of customs fees. The White House also said it would accept the Senate's bill.

"They're not exactly lobbying particularly hard," said moderate Rep. Michael Castle, R-Del.