House votes to preserve bottom tax bracket, looks next to child tax credit

WASHINGTON (AP) _ Having voted in favor of keeping tax cuts that show up in virtually every worker's paycheck, the House turns next to the child tax credit. <br/><br/>That credit is due to drop from

Friday, May 14th 2004, 6:05 am

By: News On 6

WASHINGTON (AP) _ Having voted in favor of keeping tax cuts that show up in virtually every worker's paycheck, the House turns next to the child tax credit.

That credit is due to drop from $1,000 to $700 next year unless lawmakers act. Legislation dealing with the child tax credit would be the last in a series of bills preventing several popular tax cuts from expiring at the end of the year.

The bills aimed at preserving expiring tax cuts have moved easily through the House, and gained support from some Democrats, although many of them have voiced concerns about worsening budget deficits.

The House voted 344-76 Thursday to pass the tax bracket bill, which makes permanent the bottom bracket created in 2001, when the tax on the first $6,000 in earned wages was lowered from 15 percent to 10 percent. In 2003, Congress expanded the bracket to cover the first $7,000 earned.

Under current law, the bracket shrinks back to $6,000 next year and disappears entirely in 2011. Republicans said 73 million taxpayers can expect to pay higher taxes next year if the law isn't extended.

``Preventing a tax increase is essential for taxpayers at all income levels, especially those in the lower 10 percent bracket,'' said Treasury Secretary John Snow.

The House already has voted to preserve tax cuts for married couples and acted to ensure the alternative minimum tax doesn't claw back the tax cuts.

The alternative minimum tax, imposed to prevent wealthy families from dodging income taxes, reaches further into the middle class each year.

The Senate plans to pass one bill extending the expiring tax credits later this year.

The last in the series of House bills securing President Bush's tax cuts would prevent the $1,000 child tax credit from dropping down to $700 next year. Other changes would make the credit available to more upper-income and more lower-income families.

One adjustment increases the amount of money taxpayers can make before the credit starts to disappear to $125,000 for individuals and $250,000 for married couples. Currently, the credit starts to shrink for single individuals who earn $75,000 or more and married couples who earn $110,000 or more.

Another change lets lower-income families get as much as 15 percent of the credit as a refund check this year. With no action, that change would take place next year. Lower-income families can currently claim up to 10 percent of the credit as a refund.

Lawmakers also want to protect military personnel who receive tax-free combat pay from penalties when they claim the credit.

Also Thursday, the House voted to let small businesses band together through national trade associations so they may offer insurance for their employees. It's the second time the bill has been passed in two years.

The legislation was approved 252-162, despite opposition from critics who said older, less healthy workers could be excluded and that the White House-backed bill would waive states' minimum coverage standards by giving oversight of group health insurance plans to the federal government.

The measure has scant chance of becoming law this year because key Republican and Democratic senators are opposed. Other opponents include governors, state attorneys general, the AFL-CIO and the Blue Cross and Blue Shield Association _ a major provider of coverage for small businesses.