Extend child tax credits and marriage-penalty fixes
Barack Obama
Will extend aspects of the Bush tax cuts such as child credit expansions and changes to marriage bonuses and penalties.
Obameter
Promise Kept
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In passing a tax bill to forestall the "fiscal cliff" -- the overnight rise of a wide array of taxes combined with deep spending cuts -- lawmakers agreed to extend tax cuts relating to children and marriage.
During the 2008 presidential campaign, Barack Obama promised to extend aspects of the tax cuts passed under President George W. Bush, including child credit expansions and changes to marriage bonuses and penalties.
We already rated this a Promise Kept after Obama signed legislation on Dec. 17, 2010, that continued those measures for another two years.
The fiscal cliff bill, passed by the House and Senate on Jan. 1, 2013, extends several tax credits, or portions of tax credits, for five years. These include:
• Earned Income Tax Credit. Under current law, working families with two or more children currently qualify for an Earned Income Tax Credit equal to 40 percent of the family's first $12,570 in earned income. The stimulus set the rate at 45 percent for families with three or more children and made other adjustments. The fiscal cliff bill extends these provisions for five additional years, through 2017.
• Child Tax Credit. The stimulus set a new threshold for refundability of the credit, and the fiscal cliff bill extends that for five years, though 2017. In addition, the fiscal cliff bill permanently extends changes made under President George W. Bush that increased the amount of the credit and expanded the terms of the refundability.
• Marriage penalty. A "marriage penalty" describes what happens when a couple pays more income tax if they file jointly as a couple than they would if they had remained single and filed as individuals. The fiscal cliff bill permanently extended marriage penalty relief for the standard deduction, the 15 percent bracket, and the Earned Income Tax Credit.
• Dependent Care Credit. The dependent care credit benefits taxpayers who have child care expenses for children under 13 and disabled dependents. Under Bush, the amount of eligible expenses was increased. The fiscal cliff bill makes those changes permanent.
• Adoption tax credits. Taxpayers who adopt children can receive a tax credit for adoption expenses and can exclude adoption expenses paid by an employer from the calculation of their income. Under Bush, the terms of this credit became more generous, and under Obama's health care law, these benefits were extended and the credit was made refundable. The fiscal cliff bill extends these provisions permanently.
We rate this a Promise Kept.
Text of H.R. 8 ("fiscal cliff" bill)
House Republican Conference, summary of H.R. 8 ("fiscal cliff" bill), Jan. 1, 2013
Washington Post, "Wonkbook: Everything you need to know about the fiscal cliff deal," Jan. 1, 2013
Urban Institute-Brookings Institution Tax Policy Center, issue brief on the marriage penalty, accessed Jan. 3, 2013
Email interview with William McBride, economist with the Tax Foundation, Jan. 3, 2013
In the debate over taxes during 2010, both parties agreed that the tax rates for the middle class should be continued. The tax rates, passed during President George W. Bush's administration, had an end-of-the-year expiration date and were set to go up in 2011. That included child tax credits and marriage-penalty fixes.
Yet getting the tax rates continued proved surprisingly contentious. President Barack Obama said Republicans were holding tax cuts for the middle-class "hostage" to get tax rates for higher earners continued. So Obama agreed to continue the current tax rates for everyone, regardless of income. Additionally, Obama won another year of unemployment benefits for workers who qualified, and he won a one-year reduction of Social Security taxes that put 2 percent of pay back into workers' paychecks.
Here, we're rating Obama's promise to extend child tax credits and marriage-penalty fixes. The legislation Obama signed on Dec. 17, 2010, continues those tax measures for everyone for another two years. We'll check back on this promise in 2012, but for now we're rating this Promise Kept.
The White House, Fact Sheet on the Framework Agreement on Middle Class Tax Cuts and Unemployment Insurance, Dec. 7, 2010
Thomas, HR 4583
The White House, Press Conference by the President, Dec. 7, 2010
U.S. Senate Finance Committee, S.A.4753: The Reid-McConnell Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010
President Obama has said he would roll back the Bush tax cuts on higher incomes, meaning $200,000 in income for singles and $250,000 for couples. But he intends to leave in place the Bush tax cuts for everyone who makes less than that.
In the case of this particular promise, the outline for Obama's 2010 budget shows he intends to keep expansions of the child tax credit, as well as adjustments that do away with a marriage penalty for couples who file jointly. These exemptions would phase out for people at higher incomes, who will see hefty rate increases under the Obama plan.
When the tax cuts were first enacted in 2001 and again in 2003, the legislation came with "sunsets," or scheduled expiration dates. Without further action, tax rates will go up for everyone in 2011; at the time it was considered a way to rein in future deficit projections. So new legislation is required to keep in place those current policies, and the budget outline indicates Obama intends to pursue that legislation.
Congress still needs approve Obama's budget, and there will likely be arguments over many things in it. But little opposition is expected to retaining the child credit expansions and marriage penalty fixes. For now, though, we're rating this promise In the Works.
Office of Budget and Management, Budget Documents for Fiscal Year 2010 , Feb. 26, 2009