STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - January 09, 2007)
Mr. OBAMA. Mr. President, I rise to speak about the Child Tax Credit and to support S. 218, a bill I've worked on with Senators Snowe and Lincoln. Working families should get the tax relief they deserve, and I am proud to cosponsor this bill to help realize this aspiration. The Child Credit is an important component of our Federal tax code, and S. 218 is an important step in making the credit more valuable and more fair for those who need it most.
Raising children is expensive and has become even more so in recent years. The Child Tax Credit allows middle class families to claim a credit of $1,000 per child against their Federal income tax. That's a big help in covering these rising costs.
Importantly, the Child Credit also recognizes the particular vulnerability low-income families with children. Since the credit is refundable to the extent of 15 percent of a taxpayer's earned income in excess of $11,300, families earning more than that threshold level of income get at least a partial benefit even if they have no Federal income tax liability. The benefit may be small for families with low incomes, but every penny helps defray the rising costs of being a working parent in America today.
Unfortunately, as currently structured, the Child Credit leaves more and more families out of the benefit each year. That's because the income threshold for eligibility rises annually at the rate of inflation even though family incomes may not rise as fast. That means that if you earn the minimum wage, or if your wage is low and you didn't get a raise, or if you worked fewer hours than the year before, then your tax refund probably shrunk. It may even have disappeared. Given that an estimated four and a half million households with children experienced this decline last year alone, we must reverse this unintended--and unfair--effect.
In many cases, indexing the parameters of the tax system for inflation makes sense because it neutralizes the effects of inflation on the tax system. In this case, however, indexing the threshold results in an unfair tax increase for low-income, working families whose incomes are not keeping up with rising costs. Recent data indicates that the typical low-income household actually saw its earnings decline during the first few years ofthis decade. At the same time, the costs of housing, childcare, and driving to work have increased sharply.
This bill returns the threshold to its original level of $10,000 and freezes it, thereby expanding the benefit to include more kids and protecting those families from unfair tax increases due to inflation. This is an important step in improving the fairness of our tax code and providing necessary support to working families.
In time, I hope we will do more. It is unfair that more than eight million children in families with incomes too low to qualify for even a partial credit get no benefit at all. These are families whose incomes are far below the Federal poverty level and whose children ironically have the greatest needs--even as their parents pay an enormous share of their incomes in taxes and basic services, such as food, housing, and clothing.
America can do better. In the new Congress, I hope we will tackle the broader challenge of ensuring that their parents have jobs that pay living wages, a home they can afford, a school district that enables a life of opportunity, a community that cares for its children, and the faith that hard work and personal commitment payoff. America can do this.
I urge my colleagues to join me in supporting this important bill as a first step in addressing the broader goal of equal opportunity for all Americans.