*House Republicans dig in against child tax credit for combat troops*

by Rick Maze Navy Times staff writer June 13, 2003

A new bill called the All-American Tax Fairness Act could make it more difficult for Congress to approve military-related tax reform.

The bill, HR 1308, is the response of House Republicans to a bipartisan Senate bill modifying child tax credits that were signed into law last month.

Among the changes approved by the Senate are special rules for military members who have served in a combat zone. Because of combat-zone tax exclusions on their pay, an estimated 200,000 military families are ineligible for the $400 increase in the child tax credit because their taxable income falls between $10,500 and $26,625. The Senate bill, called the Child Tax Credit Act, would make them eligible by allowing them to count non-taxable income earned in a war zone toward eligibility for the child tax credit.

That credit is retroactive. The U.S. Treasury Department is preparing to send the $400-per-child checks in July or August to those who are eligible. Sen. Charles Grassley, R-Iowa, the Senate Finance Committee chairman, has been pushing for quick passage of changes to the tax credit so that refund checks for service members, and working poor families who would be helped by other provisions of the bill, are not far behind the checks for other American families.

The House, however, has its own ideas. It took the $10 billion Senate bill and expanded it into a much bigger, $82 billion measure. One of the things House lawmakers added is the long-delayed Armed Forces Tax Fairness Act that includes relaxed rules on capital-gains tax exemptions when service members sell a home; restored deductions for reservists who travel long distances for drills and stay overnight at their own expense; and a move to make military death gratuity payments entirely tax free.

There are some child tax-credit provisions that would make the working poor eligible for at least part of the $400 increase, but the House legislation does not contain the Senate-approved language about troops serving in a combat zone.

In what House Republicans described as an attempt to balance the Senate's fixation on helping the poor, the House bill would extend the child tax-credit increase for other taxpayers through 2010, instead of dropping the new maximum $1,000 credit back to $600 in 2005. It also would eliminate a marriage penalty for couples with incomes of up to $150,000 who apply for the child tax credit.

Rep. Bill Thomas, R-Calif., the House Ways and Means Committee chairman who fashioned the House bill, said he didn't think it was necessary to include the combat-zone eligibility rules for service members since their income wasn't being taxed. "This is raw politics," he conceded.

And he said the bill was doing something for troops by including the entire House version of the Armed Forces Tax Fairness Act, a bill that has passed the House and Senate several times but has never been enacted because lawmakers have never met to work out minor differences. 

Putting $836 million of military-related tax provisions into a bill that appears to be going nowhere because lawmakers have no way of paying for the $82 billion in other tax cuts doesn't seem like progress, said military association representatives who have pushed for the changes. But they did not want to publicly criticize Thomas because of the influence he has over tax legislation.

Rep. Charles Rangel of New York, senior Democrat on the Ways and Means Committee, said House Republicans really don't have any intention of getting the tax bill approved.

"This is one of the most cynical and hypocritical moves I have ever seen," he said. "When it comes to tax relief, Republicans have their priorities backward. They pass hundreds of billions in tax breaks for people who have lots of unearned income, such as capital gains and dividends, but they penalize those who work hard for a living and, worse yet, those who have put their lives on the line for the country.

"The Republicans actually think that the child of a combat veteran should receive a smaller child tax credit than the child of a member of Congress because the member pays more income tax," Rangel said. 

The Senate isn't any happier with the House bill. The Child Tax Credit Act passed the Senate by a 94-2 vote. In a joint statement, Sens. Blanche Lincoln, D-Ark., and Olympia Snowe, R-Maine, said the House seems bent on slowing down the process.

"We don't have time to hold these working families hostage in a protracted debate about another large tax cut," their statement says. "Playing politics with the refundable child tax credit just raises the bar for these working families, and that's just not fair."

Read this at: http://www.navytimes.com/story.php?f=0-292243-1938323.php

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