TAX CREDIT MEANINGFUL FOR PARENTS
January 5, 1996
While some politicians, including President Clinton, dismiss the importance of the $500-per-child tax credit that is part of the Congressional balanced budget plan, others argue for its merits both for the families and for the economy.
- Under the plan, a husband and wife would get a federal tax credit of $500 for one child, $1,000 for two children, etc.
- The tax credit would benefit more than 28 million families.
- The tax credit would increase the spending power of families with children by $22 billion per year nationwide.
- An extra $54 million a year could be spent in the typical congressional district (with an average 117,000 children).
On a personal level, $1,000 could pay a month's mortgage ($664), car payment ($277) and phone bill ($67), using the Bureau of Labor Statistics' annual Consumer Expenditure Survey figures.
Those who favor the tax credit point out that the government is not giving families anything, merely failing to take as much away as it has been taking. For a bit of historical perspective:
- In 1948, the average U.S. family paid 3 percent of its income to the federal government.
- Today that family pays 24.5 percent.
The $500-per-child credit would reduce that tax burden by only 10 percent, but would significantly benefit the vast majority of working class Americans:
- It would lower the income tax hit on a family of four making $30,000 by 51 percent.
- It would reduce the income tax burden on a family of four earning $40,000 by 30 percent.
- Families earning up to $24,000 per year with two children and those earning up to $26,000 with three children -- 3.5 million families -- would pay no taxes at all.
Source: Scott A. Hodge (Heritage Foundation), "Tax Credit Would Mean a Lot to Parents," Dallas Morning News, December 29, 1995.
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