Revised June 25, 2003

By Robert Greenstein

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On June 5, the Senate passed 94-2 a bill that would restore a child tax credit provision for low-income working families that was dropped in the House-Senate conference on the large tax-cut bill signed May 28.  There has been some confusion about the new Senate legislation.

Some new reports have stated that the Senate bill would extend the child tax credit to more low-income families.  Some news accounts also have noted the inclusion in the bill of a provision extending eligibility for the credit to higher-income families and described the families made eligible as those in the $110,000-$150,000 range.  A number of reports have said the bill’s $10 billion cost would be offset by increasing customs fees.  All of these statements are at least partially incorrect.

Impact of Senate Bill on Low-income Families

(Married Family with Two Children)


Current Child Credit

Credit Under Senate Bill

Increase Per Child













As a result of this provision, analysis by the Urban Institute-Brookings Institution Tax Policy Center finds that in 2010, some 99 percent of the tax benefits under the Senate bill would go to the top fifth of households, with 78 percent of the benefits going to the top 10 percent of households.

Child Tax Credit Phase-out for Married Couples

Number of children

Current law

New Legislation in 2010

Credit begins to phase out at incomes of:*

Credit phases out completely at:

Credit begins to phase out at incomes of:*

Credit phases out completely at:
















* Credit is reduced by $50 for each $1,000 of income above this threshold level.

A last point is that while the bill assists 6.5 million low-income working families, it could work to the detriment of some other low-income working families, although this is not clear.  The extension of the customs users fees in the bill is considered by the Congressional Budget Office to be a reduction in federal outlays (i.e., in expenditures), rather than an increase in government revenues.  Extension of these fees was the sole significant source of funding available to the Senate Finance Committee to cover anticipated costs for several key components of upcoming welfare reauthorization legislation — such as costs for child care funding needed to prevent a sizeable reduction in child care slots for the working poor, for extending and strengthening a program that provides health insurance coverage for families that have worked their way off welfare (this proposal is largely included in the President’s budget), and funds to strengthen child support enforcement.  If the customs fees are used for the child tax credit legislation instead, this financing source will be unavailable to cover such child care, health care, and child support enforcement costs over the next five years.  As a consequence, the Finance Committee would face the alternatives of producing a welfare reauthorization bill that exceeds its outlay ceiling and thus needs 60 votes to pass on the Senate floor, making cuts in other programs deep enough to cover these costs, or failing to include the child care and health care funds, with the result that cuts in child care slots and health insurance coverage for low-income working families would ensue.

Legislation introduced June 2 by Senators Blanche Lincoln and Olympia Snowe would have restored the low-income child tax credit provision dropped from the recently enacted tax-cut bill and offset the cost through measures to curb corporate tax shelter abuses the Senate had approved as part of the larger tax-cut bill it passed in May.  (These measures were dropped in conference.)  The provisions to curb tax shelter abuses fell out of the new child credit legislation in the last couple of days, however, as the legislation was negotiated in the Senate.  In the end, the extension of the customs fees was used not only to cover the cost of the low-income child tax credit provision but to cover the cost of the new tax cut for higher-income families as well.

End Note:

[1] These estimates come from an analysis by Citizens for Tax Justice.  Analysis by the Urban Institute-Brookings Institution Tax Policy Center finds a modestly larger number of low-income families — 7.1 million — would benefit.  The Tax Policy Center estimates that these families would receive an average increase in their credit of $276 per family.