Wall Street Journal, Monday, June 2, 2003, p. A4

By John D. McKinnon;

WASHINGTON -- The chairman of the Senate Finance

Committee wants to revisit the just-passed tax bill in

order to expand a break for people with children.

But the move could reopen rifts among Republicans over

shutting down tax shelters and other tax-code largesse

for corporations and the well-to-do.

Through a spokeswoman, Sen. Charles Grassley, an Iowa

Republican, said he would introduce legislation to

make permanent an expansion of the child credit to

$1,000 from the previous $600. That was a top priority

for Mr. Grassley this year, but in the final version

of the bill, Congress set the expanded credit to

expire in 2005, in order to fit the overall package

within the $350 billion, 10-year budget framework that

Senate moderates demanded.

In his bill, Mr. Grassley also wants to extend the

expanded child credit to several million low-income

households that wouldn't get it otherwise. They by and

large pay no income tax under current rates and can't

get any more money back now from the credit, under a

formula that determines how much of it they receive as

a "refund." In last-minute negotiations, Congress also

dropped a provision that would have made that break

more generous for those families.

A new analysis during the weekend suggested further

problems: The report contends that as many as eight

million households would get nothing from any aspect

of the new tax cut. The analysis by experts at the

Brookings Institution and Urban Institute, two liberal

Washington think tanks, contradicted Republican claims

that all taxpayers would get a rate cut from the bill.

Many of those problems are likely to be impossible to

solve, given budget constraints, experts acknowledged.

But during floor debate, Republican senators left no

doubt they again would seek to make the child credit

permanent. Numerous Democrats and at least one

Republican also denounced the dropping of the

provision for lower-income families, suggesting that

issue wouldn't go away. Now, Mr. Grassley proposes to

revisit those issues soon.

Such changes probably would require 60 votes under

Senate rules. But that might not be such a high

hurdle, given the popularity of the issues.

The real question is whether the Senate would attempt

to pass them without offsetting increases in tax

revenue -- for example, by closing tax-shelter

loopholes. Mr. Grassley doesn't plan to add offsets,

his spokeswoman said. But Democrats might well try.

One reason would be to reduce the high cost of the

changes Mr. Grassley is contemplating -- possibly as

much as $61 billion over 11 years. It is also an

opportunity to embarrass House Republicans, who have

become increasingly resistant to such measures. In the

rush to complete final negotiations on the tax cut,

House Republicans succeeded in forcing out all such

measures, including a set of changes designed

specifically to end tax loopholes discovered during

the investigation of Enron Corp.

A spokesman for House Speaker Dennis Hastert (R.,

Ill.) said House Republicans could well be supportive

of the child-credit expansion. They remain wary of

anything that looks like a tax increase, however,

spokesman John Feehery said.

But critics noted that linking the tax-shelter curbs

directly to the child-credit expansion could make it

hard for Republicans to say no. "Presented with such a

package, House Republicans would have to argue that

preserving corporate tax shelters is more important

than extending the child credit," said Brookings

economist Peter Orszag, who served in the Clinton

administration.

The New York Times, Monday, June 2, 2003, p.A21

[op-ed]

The Reverse Robin Hood

By Bob Herbert

If you wanted a quintessential example of what the

Bush administration and its legislative cronies are

about, it was right there on the front page of The

Times last Thursday:

"Tax Law Omits $400 Child Credit for Millions."

The fat cats will get their tax cuts. But in the new

American plutocracy, there won't even be crumbs left

over for the working folks at the bottom of the

pyramid to scramble after.

When House and Senate negotiators met to put the

finishing touches to President Bush's tax bill, they

coldly deleted a provision that would have allowed

millions of low-income working families to benefit

from the bill's increased child tax credit.

It was a mean-spirited and wholly unnecessary act, a

clear display of the current regime's outright

hostility toward America's poor and working classes.

The negotiators eliminated a provision in the Senate

version of the tax bill that would have extended

benefits from the child tax credit to families with

incomes between $10,500 and $26,625. This is not a

small group. According to the Center on Budget and

Policy Priorities, the families that would have

benefited include about 12 million children -- one of

every six kids in the U.S. under the age of 17.

While the tax bill will lavish hundreds of billions of

dollars in benefits on people higher up the income

scale, it leaves this group of working families very

ignominiously behind.

And readers of yesterday's Times learned that another

group of some eight million mostly low-income

taxpayers -- primarily single people without children

-- will also be left behind, getting no benefit at all

from the president's tax cuts. Forget about

trickle-down. The goal of this administration is to

haul it up.

The provision to extend the tax credit to more

low-income families was the work of Senator Blanche

Lincoln, an Arkansas Democrat who noted that half of

all taxpayers in her state had adjusted gross incomes

of less than $20,000. The full Senate approved the

provision, but the negotiators knocked it out at the

last minute, behind closed doors.

While the most well-heeled Americans are happily

inflating their bankrolls, there are families with a

total of 16 million children at the low end of the

income scale who, for one reason or another, won't get

the help they should -- their fair share -- from this

tax bill. About half of all African-American and

Latino children get no benefit -- or only a partial

benefit -- from the child tax credit, according to the

Children's Defense Fund and an advocacy group called

the Children's Research and Education Institute.

When the whistles were blown on the child-tax-credit

outrage, Republican leaders were unable to give a

coherent explanation for their action. Some tried to

argue that they had to scrap the provision to keep the

total cost of the tax bill from exceeding $350 billion

over 10 years, their agreed-upon limit.

That was not true. For one thing, the $350 billion

limit was a completely arbitrary and largely fictional

figure. The true cost of the tax bill over 10 years

will be closer to a trillion dollars than the

deliberately deceptive $350 billion figure that the

G.O.P. has chosen to use.

Senator Lincoln's provision, which would have offered

a little help to so many people who need it, would

have cost only $3.5 billion. Even within the phony

$350 billion limit, a slight adjustment in a number of

different windfalls for the very wealthy would have

opened up sufficient room for this modest tax break.

But to really get a sense of the scandalous nature of

this G.O.P. tax-cut scam, consider that the House and

Senate negotiators also got rid of a number of

measures in the Senate bill that would have saved

billions of dollars by closing abusive corporate tax

structures. The Center on Budget noted the following:

"As the Washington Post has reported, the Senate bill

'included provisions to crack down on abusive

corporate tax shelters, combat some accounting scams

such as those pursued by Enron Corp., prevent U.S.

companies from moving their headquarters to post

office boxes in offshore tax havens such as Bermuda

and limit grossly inflated deferred compensation plans

for corporate executives.'"

The savings from those provisions would have been

about $25 billion, much more than enough to cover the

cost of Senator Lincoln's $3.5 billion attempt to give

a bit of a break to several million working families.