Spotlight Exclusives

Obama۪s Proposed Recovery Package to Include Big Help for Low-income Kids

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Even before they take office, the Obama team is being quite responsive to recommendations from advocates for low-income families, apparently agreeing to add a benefit targeted to very poor families with kids.

According to reports in today۪s WSJ, President-elect Obama will propose in his economic recovery package a big expansion of the child tax credit. Until now, there had been little or no public indication that expansion of the CTC a top priority for advocates like the Center for Community Change, First Focus, and the center on budget and Policy Priorities might be included in the proposed economic recovery package. Nor was it a part of his campaign platform.

However, according to the WSJ, Obama’s advisers on Monday outlined a potential new feature of the recovery plan to congressional aides, saying they would press for a tax change that would allow more families that earn too little to pay income taxes to claim at least some of the $1,000-per-child CTC. That would amount to an income subsidy, since it would refund taxes they are too poor to pay.

The plan would grant an estimated 5.5 million poor children access to the credit for the first time, and expand the tax benefit for millions more poor children who currently qualify for only a partial credit, according to its supporters. The change has been sought by advocates, Democrats and some moderate Republicans for years.

As of January 1 of this year, a household must earn at least $12,500 a year to be eligible to claim any of the child credit. The proposal under discussion would lower that threshold, likely to $3,000, a level favored by many child and family advocates and top House Democrats, at a possible cost to taxpayers of $18 billion, according to the WSJ, which cited folks close to the discussions. Currently, a mother earning $5,000 a year would get no CTC. With a $3,000 threshold, she would get $300.

Unlike other tax related elements of the evolving economic recovery package, this expansion of the CTC would be highly targeted and progressive, benefiting only low-income families with kids.

Last year, as part of the first stimulus package, Congress had enacted a temporary patch, lowering the CTC threshold from $12,050 to $8,500, but that was only for tax year 2008.  If enacted Obama۪s proposed expansion would go much further and presumably be permanent.

If true, the reported proposal is significant not only because it would put billions of dollars in the pockets of very low-income families, but also because it shows that Obama and his people are listening to folks who care about poverty and opportunity.  OOTS approves, and urges all advocates toget behind this proposal and fast!

posted by Mike


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