We have a nation that is struggling to make ends meet. The families I talk to back home – whether at the grocery store or in church – are fed up with a new normal where Americans are paying more for everything, while taking home less. Costs for everyday essentials such as gas, groceries, and electricity all continue to rise while household incomes remain stagnant.
There is no need to compound these problems with a tax code that is working against families and the ever rising costs of raising children.
The Child Tax Credit was originally enacted in 1997 by a Congress concerned with a tax code that did not reflect a family’s reduced ability to pay as family size increased and seeking to ease the financial burden that families incur when having children.
The original credit amount was eventually increased and made partially refundable to reach more and more families. However, since being expanded to $1,000 in 2004, the child tax credit has failed to keep pace with costs.
A recent study by the U.S. Department of Agriculture estimated that for a middle-income couple it will cost over $241,000 to raise a child until age 18.
Contributing the most to these raising costs are items such as spending on education and child care. In fact, since 2000, the cost of child care has increased twice as fast as the median income of families with children.
The Child Tax Credit Improvement Act indexes the credit and the limitations to inflation to help parents keep more of their hard earned money to use for the mounting expenses of parenting.
Under the bill, the amount of the child tax credit would be indexed for inflation and the marriage penalty would be eliminated by increasing the joint filing phase-out threshold to exactly double that of single filers.
Indexing for inflation has become an established part of our tax system.
The lack of indexing a particular provision to inflation means that provision is worth a little bit less to taxpayers every year. In the case of the child tax credit, this means working low- and middle-class families.
The lack of indexing means that families paying more for groceries, gas, clothing and other necessities have less real income and purchasing power each year. This legislation essentially removes the annual hidden tax placed on these families and recognizes that a dollar of income in 1998, in 2004 is not the same as one in 2014.
Similar tax credits that Congress has smartly indexed to inflation include the adoption tax credit, the earned income tax credit and education tax credits.
Increasing the phase-out level is a family friendly change that greatly simplifies the tax code for middle class parents currently forced to perform a complicated computation and increases fairness across the code.
This is sensible legislation that will help hardworking families keep more of their paychecks and help pay for the rising costs of raising a family.
I thank the Chairman for allowing the bill to be marked up today.