[Congressional Record Volume 149, Number 110 (Wednesday, July 23, 2003)]
[Senate]
[Pages S9744-S9746]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            CHILD TAX CREDIT

  Mr. BAUCUS. Mr. President, it has been 48 days since the Senate 
passed the Lincoln-Snowe bill to provide child tax credit to the 
families of 12 million children. Twelve million, Mr. President, is not 
a small number of children in America. The House then passed a 
different child tax credit bill.
  Thirty-five days ago, the Senate appointed conferees to work out the 
differences between the two bills--35 days--and the conference has yet 
to hold its first meeting.
  On July 25, just 2 business days from today, many families will begin 
receiving checks for the increased child tax credit, but millions of 
families will find their mailboxes empty. Why? Millions who hoped for 
such a credit will not receive it. Why? Because the conference has not 
met and the House has not agreed to the Senate provision. The Lincoln-
Snowe bill, however, would ensure that these families are not left 
behind. In 2 working days, the House plans to adjourn for the remainder 
of the summer, not addressing this important question. We must, rather, 
send a bill to the President before that time so that millions of 
children can receive the benefit.

  Just a few years ago, in 2001, the President brought a tax reduction 
proposal to Congress. The proposal was based upon the premise that 
taxpayers across the board were paying too much of their income in 
taxes. The President included the working poor, citing extremely high 
marginal rates. At the

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time, the working poor faced marginal rates above 50 percent, among the 
highest marginal rates faced by any taxpayer.
  What does that really mean? That means that for the working poor, 
with their marginal rates above 50 percent, for every extra dollar that 
a person in that category earned, more than half of that would be 
taxed, and less than half would then be kept by the taxpayer. That is 
the effect of the high marginal rate of the working poor.
  The President's economic advisers called this an ``egregious 
problem'' in our Tax Code. On the campaign trail, candidate George Bush 
pledged that, ``lowering these barriers to the middle class'' was one 
of his top priorities.
  I worked with the President in 2001 to reduce the marginal rates for 
working Americans. I think he was right. The bill we enacted included 
marginal rate cuts for taxpayers across the board. It also included two 
provisions specifically targeted at reducing the marginal rate for low-
income workers. First, it reduced the lowest marginal rate; that is, 
the tax paid on the first dollar of taxable income from 15 percent to 
10 percent. Second, it made the child tax credit partially refundable 
for working families. Currently, the child credit is refundable up to 
10 percent for a family's income above $10,500. In 2005, this amount is 
set to increase to 15 percent, up from 10 percent.
  The marginal rates for working taxpayers are less than they were 
before the 2001 bill was passed, and they will be less in 2005. I 
believe, frankly, we should do more.
  Under current law, taxpayers in the lower income brackets face 
marginal rates as high as 46 percent, as represented by this chart. 
That is, under current law taxpayers in the lower income brackets face 
marginal rates as high as 46 percent. This chart shows that for a 
married couple with two children, with an income of $27,000, the 
marginal rate is 46 percent. Compare that with the marginal rate of 
higher income Americans. For a family with two children, a family of 
four, with $100,000 of income, the marginal rate is only 28 percent. 
That is, the Government takes 28 cents of the next dollar earned by a 
family in the $100,000 income bracket.
  Correspondingly, it rises as the income rises but not much, and still 
not nearly as high as a working family with $27,000 total income. Their 
marginal rate is 46 percent. It is much higher than the marginal rate 
is for higher income Americans.
  So let's take an example. A family of four making $27,000, that is 
about 150 percent of poverty. What happens to that family? If they earn 
an additional dollar of income, they lose 21 cents of the earned-income 
tax credit they receive. They lose it because of the phaseout of the 
earned-income tax credit. They pay payroll taxes of 15 cents if 
we include both shares of the payroll taxes, as most economists do. And 
they pay 10 cents in Federal income tax. This adds up to a marginal 
rate of 46 percent for a family of four earning $27,000. This is how it 
is broken down: Income tax, 10 percent; payroll tax, 15 percent; and 
because of the way the Tax Code works, and the earned-income tax credit 
phases out, that amounts to a 21-percent marginal rate that taxpayer 
has to pay. So for every additional dollar this family makes, they keep 
only 54 cents. Forty-six cents on every additional dollar made goes to 
the Federal Government. We are not even talking about State taxes. We 
are just talking about Federal taxes. So State taxes could be a lot 
more.

  How does this compare with other taxpayers? This family making 
$27,000 faces a higher marginal rate today than a similar family making 
$100,000, $150,000, or $200,000 as shown by the same chart shown 
earlier. It is very clear that lower income persons pay higher marginal 
tax rates. In fact, this family has a marginal rate that is higher than 
the wealthiest taxpayers in America, if my colleagues can believe that.
  If we are supposed to be encouraging people to work, logically lower 
income Americans would have a lower marginal rate because we want to 
encourage people, particularly in that category, to earn an extra 
dollar. But our Tax Code is so perverse it causes the reverse result. 
It is far higher than the corporate rate of 35 percent.
  Just think of that. I do not think many people know that. That is, 
lower income working families, families with a $27,000 income, pay a 
higher marginal rate than corporations do. I do not think most 
Americans know that, and if most Americans did, they would think that 
is not right. Hence, many of us are today urging the Congress, urging 
the other side of the aisle in particular, to work with the House and 
pass a child tax credit in the remaining 2 days before the House 
adjourns for the summer recess.
  Senators Lincoln and Snowe deserve a lot of credit. They have led the 
effort to reduce the marginal rates for working families. They began in 
2001 when they fought to ensure that low-income working families would 
be able to receive a refundable child credit, and they are now fighting 
to ensure that these families receive the full child tax credit today.
  I will explain how the refundable child credit reduces the marginal 
rate for working families. Let's take a family of four making $22,000. 
Without the refundable child credit, their marginal rate would be 36 
percent. The current credit, which is 10 percent refundable, brings 
their marginal rate down to 26 percent. In 2005, the refundability of 
the child credit will increase to 15 percent. This family's marginal 
rate will then go down to 21 percent, from 26 percent.
  We have all heard the argument for immediate tax relief: If tax 
relief is good enough in a few years, it is good enough today. We have 
heard it constantly. It is a constant refrain in this body. This was 
the theory behind President Bush's jobs and growth package, which 
accelerated marginal rate reductions for millions of taxpayers, 
including those making $100,000, $200,000, or even $1 million. For a 
family making $100,000, the marginal income and payroll tax rate was 
reduced in that package from 30 percent to 28 percent. For the family 
making $200,000, the rate was reduced again from 38 percent to 36 
percent, and for millionaires the rate was reduced from almost 42 
percent to 38 percent.
  The provision that would have reduced the marginal rate for low-
income working families, that is the increase in child tax credit 
refundability, was specifically excluded from the final bill. If 
marginal rate reductions are good enough for the wealthy today, are 
they not good enough for the working poor? The answer from the Senate 
was a resounding yes. The Lincoln-Snowe bill to reduce marginal rates 
for the working poor immediately passed the Senate almost unanimously.
  The marginal rates for the low-income working families are still too 
high. Passing the Lincoln-Snowe bill is an improvement. This 
improvement will provide additional incentives to work and earn the 
extra dollar, which is basically what tax reduction is all about, and 
it would shrink what the President has called barriers to the middle 
class.
  We have 2 working days left, 2 days to convene this conference, work 
out our differences, send this bill to the President; 2 days to ensure 
that low-income working families receive the same tax relief that is 
promised to the rest of America's families, and 2 days remaining to 
ensure we fix this problem. Even President Bush agrees this is an 
egregious problem in the Tax Code. I strenuously urge us to put 
politics aside and do what is right and convene this conference 
committee. Let's get this passed in the next 2 days before the House 
adjourns for the summer.
  I yield the floor, and I suggest the absence of a quorum and ask 
unanimous consent that the time be equally divided on both sides.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. HARKIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Chafee). Without objection, it is so 
ordered.
  Mr. HARKIN. Mr. President, parliamentary inquiry: What is the status 
of the floor situation?
  The PRESIDING OFFICER. The Senate is in a period of morning business. 
The minority controls 13\1/2\ minutes and the majority controls 1 
minute.
  Mr. BAUCUS. How much time would the Senator like?

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  Mr. HARKIN. Ten minutes.
  Mr. McCONNELL. Parliamentary inquiry: Is there an agreement under 
which the Senator from Kentucky should be recognized at 10 a.m.?
  The PRESIDING OFFICER. There is no order at this time.
  Mr. McCONNELL. How long will the Senator from Iowa speak?
  Mr. HARKIN. Ten minutes.
  Mr. McCONNELL. I ask unanimous consent I be allowed to follow the 
Senator from Iowa.
  Mr. BAUCUS. Reserving the right to object, would the Chair inform the 
Senate of the present parliamentary situation?
  The PRESIDING OFFICER. The Senate is in a period of morning business. 
The majority controls 13\1/2\ minutes--12\1/2\ minutes now, and the 
minority controls 1 minute.
  Mr. BAUCUS. I ask if the Senator could perhaps yield until after we 
complete morning business. It is possible others may want to speak on 
the subject set aside for this morning during morning business.
  Mr. McCONNELL. I simply ask unanimous consent I be allowed to speak 
for 10 minutes as in morning business immediately following the Senator 
from Iowa.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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