TAX CODE SHORT-CHANGES FAMILIES OVER THE YEARS
January 12, 1996
While the proposed $500 per-child tax credit may not provide the same economic boost as cuts in capital gains tax rates or in marginal tax rates, it should be included in the final budget simply as a matter of fairness according to advocates.
They point out that over the years Congress has greatly diminished or eliminated most family tax benefits.
- When Congress reformed the tax laws in 1944, it established a $500 personal exemption, which it raised to $600 in 1948.
- That year, the median income for a family with two children was less than $3,500.
- Those families were then sending the federal government only $1 for every $50 they earned.
Today, the dependent exemption stands at less than $2,500 per dependent.
- However, if it had kept pace with income levels and inflation since 1948, the exemption would be about $9,600.
- Because Congress has not allowed it to keep pace with the changing times, a family of four pays $5,000 more in taxes this year than it would have in 1948.
- Whereas that family paid just 3 percent of its income to the federal government in 1948, it now pays more than 28 percent.
Advocates of the $500 per-child tax credit argue that leaving these dollars in taxpayers' hands, rather than the government's, would result in a more efficient economy.
Source: U.S. Senator Rod Grams (R-MN), "Investing in Families," Investor's Business Daily, January 12, 1996.
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