[Congressional Record Volume 144, Number 111 (Friday, August 7, 1998)]
[Extensions of Remarks]
[Pages E1608-E1609]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        INTRODUCTION OF LEGISLATION TO SIMPLIFY THE CHILD CREDIT

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                          HON. RICHARD E. NEAL

                            of massachusetts

                    in the house of representatives

                        Thursday, August 6, 1998

  Mr. NEAL of Massachusetts. Mr. Speaker, today I am introducing 
legislation which will simplify the child credit in a revenue neutral 
manner. Over the past three years, the tax code has become unbelievably 
complex for the average individual taxpayer. The capital gains form 
that was part of last year's Federal income tax return is only the 
first installment. The next installment will be the extraordinarily 
complex child credit form that will be required on next year's tax 
return. In a recent article in the Wall Street Journal, a tax expert 
stated that many people ``will be totally overwhelmed'' by required 
forms.
  The Internal Revenue Service (IRS) has released proof copies of the 
1998 child tax credit worksheet. These forms are extremely complicated. 
Some will be quick to blame the IRS for the complexity of the forms. In 
fact the IRS is merely the messenger. The complexity of the forms is 
the result of deliberate decisions last year by the Republican majority 
in Congress.
  Taxpayers will find out next spring that the two-page child tax 
credit work sheet is difficult to fill out and time consuming. Claiming 
the child credit goes beyond filling out the child credit forms. 
Additional calculations and forms are required.
  Under current law, all taxpayers who claim the child credit with 
incomes above $45,000 for joint filers and $33,750 for single filers 
will have to make at least a rudimentary minimum tax calculation. Many 
of these taxpayers will also have to fill out the full alternative 
minimum tax (AMT) form. In addition, large groups of taxpayers such as 
self-employed and individuals who have a capital gain distribution from 
a mutual fund will have to fill out the full AMT form regardless of 
their income level.
  The Internal Revenue Service has not completed an analysis on the 
amount of time it will take to complete the new child credit forms, but 
the Internal Revenue Service has completed a time analysis for 
completing the AMT form which will be required for many taxpayers 
claiming the child credit. It takes approximately 5 hours to complete 
this form. Not only will the taxpayer have to spend time on this form, 
many will have to fill out the Schedule D form for capital gains twice. 
The IRS estimates that it takes 5 hours and 20 minutes to fill out this 
54-line form.
  Not only is the AMT complicated, it can penalize taxpayers with 
middle-income who claim some of the new tax credits such as child 
credit and the Hope scholarship credit. In 1998, tax policymakers 
estimate that the minimum tax will cause roughly 700,000 taxpayers to 
fail to receive the full benefits of nonrefundable personal credits. 
This number is expected to increase drastically because AMT thresholds 
are not indexed for inflation. By 2007, the AMT will cause 
approximately 8 million people to lose some of the benefits of the 
nonrefundable personal credits.
  The following example shows the interaction between the child credit 
and the AMT. A married couple with 3 children and 1 child in college 
have a gross income of $67,000. They claim the family credit for a 
$1,000 and the Hope credit for $500 and this totals $1,500 in credits. 
They are required to pay the minimum tax and the minimum tax disallows 
$1,477 of their credits.
  My legislation simplifies the child tax credit and other personal 
nonrefundable credits such as the new education tax credits in the 
Taxpayer Relief Act of 1997 by eliminating their interaction with the 
AMT. The legislation allows nonpersonal refundable credits against the 
minimum tax. Under current law, a taxpayer with three or more children 
is allowed a

[[Page E1609]]

partially refundable child credit and my legislation also simplifies 
this partially refundable credit by repealing the provision which 
reduces the credit by AMT liability.
  In order to eliminate the complexities of the AMT for nonfundable 
credits and the child credit for families with three or more children, 
and to have revenue neutral legislation, the income limits for the 
beginning of the phase-out of the child credit have to be reduced from 
$110,000 to $89,000 for joint filers and $75,000 to $60,000 for single 
filers. Even with this reduction in the thresholds for the child 
credit, the thresholds are still higher than the thresholds which were 
included in last year's House Democratic substitute.
  My legislation simplifies the child credit for all taxpayers. The 
vast majority of Americans will have a modest tax reduction or will not 
be affected. I urge my colleagues to join me in cosponsoring this 
legislation. Proposing such legislation is not without risk--opponents 
can distort it for political purposes. However, I believe that it is 
important to propose constructive solution to problems. The complexity 
of the child credit is a problem that needs to be addressed.

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