ATR Supports Bill Ending Marriage Penalty in Child Tax Credit

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Posted by Ryan Ellis on Wednesday, July 23rd, 2014, 2:20 PM PERMALINK


The U.S. House of Representatives this week will consider H.R. 4935, the "Child Tax Credit Improvement Act," sponsored by Congressman Lynn Jenkins (R-Kan.)  This bill is a common sense update of the income tax's child tax credit provision, and we urge all Members to vote for it.

Under the tax code, filers with dependent children living with them receive a credit against tax of $1000 for each dependent child under the age of 17.  This credit begins to phase out when adjusted gross income (AGI) exceeds $75,000 ($110,000 in the case of a married filing jointly couple).

There are two issues with the child tax credit which H.R. 4935 addresses:

The credit amount was never indexed to inflation.  The child tax credit was first passed in 1997, and expanded in 2001 and 2003.  Since that time, it has been set at $1000 and never indexed to inflation.  H.R. 4935 corrects that beginning in 2015.

The phaseout limit was never indexed to inflation, and contains a marriage penalty.  The phaseout limits ($110,000 for married couples, $75,000 for most others) were also never indexed to inflation.  In addition, there is a marriage penalty in that the phaseout range for married couples begins at less than double the level for other taxpayers.  The current credit phaseout range creates an incentive for parents to cohabitate rather than get married, even though the tax code should be neutral on such decisions.

H.R. 4935 corrects both problems.  The married phaseout level is set to double the "other" phaseout level ($150,000 vs. $75,000).  In addition, these phaseout rates are indexed for inflation starting in 2015.

 

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