A new study shows that the child tax credit does not benefit almost half of African-American and Latino children–and it turns out that the children who see the least benefit from the credit are in Mississippi and Louisiana. We host a debate with the Children’s Research and Education Institute and the Heritage Foundation. [includes rush transcript]
The images broadcast all over the world in the days after the Hurricane Katrina disaster forced some politicians to admit that poverty and endemic racial discrimination were still major problems in the United States.
As criticism about the government’s slow response to the disaster mounted, President Bush gave a televised address where he promised to address racial inequality and implement plans to help the poor. And Congress is now considering various plans to give relief to the victims of the disaster including an expansion of the Child Tax Credit which first passed in 1997. The credit is an actual reduction in taxes as opposed to just a deduction in taxable income. It allows families to reduce the federal income tax they owe by up to $500 dollars per child per year. In 2001, President Bush extended the credit to $1,000 dollars and made it partly available to families too poor to have income tax bills. The credit phases out at incomes above $110,000 dollars and below $11,000 meaning the wealthiest and the poorest families receive nothing.
Bush has touted the child tax credit as proof that the steep tax cuts he’s implemented since he’s been in office don’t just benefit the wealthy but are good for low-income families as well. But a new study by the non-partisan Tax Policy Center shows that the program does not benefit almost half of African-American and Latino children. And it turns out that the children who see the least benefit from the credit are in Mississippi and Louisiana.
- David Harris, President of the Children’s Research and Education Institute.
- Dan Mitchell, Senior Fellow in Political Economy at the Heritage Foundation.
AMY GOODMAN: We’re joined by David Harris, President of the Children’s Research and Education Institute, and in D.C. by Dan Mitchell, an economist at the Heritage Foundation. David Harris, let’s begin with you. What’s your concern?
DAVID HARRIS: My concern here is we have what is essentially the largest child subsidy that our federal government has, about $46-$47 billion this year. And because it’s designed to go — work through the tax code, we leave about over a quarter of all children out, including half of African American children and close to half of Latino or Hispanic children, as well.
AMY GOODMAN: And specifically in Mississippi and Louisiana?
DAVID HARRIS: Well, if you look at the poverty numbers from Mississippi and Louisiana and where they line up relative to the other 48 states, you see them at the top of the list. And so the concern is — I mean, what Katrina did was really is open our eyes, open the country’s eyes to poverty, put poverty on television. And here, you have a situation where the largest child subsidy really overlooks a large number of children, the vast majority in working families.
AMY GOODMAN: Dan Mitchell, you are the Heritage Foundation’s chief expert on tax policy on the economy. Do you agree?
DAN MITCHELL: Well, I agree that if you have a tax cut, it’s not going to benefit people who don’t earn enough income to pay taxes. That’s why I thought the Tax Policy Center study was about as remarkable as saying the sun rises in the east and sets in the west. If you don’t pay taxes, when there is a tax cut, you’re not going to be among the beneficiaries. The problems we have in Louisiana and Mississippi and other low income communities around the world, is we have generations of poverty that have been subsidized by a $6 trillion war on poverty that has massively failed, because we have, in effect, destroyed the family by having the government come in and play mommy and daddy. Those are the problems we need to deal with. We need to deal with them through things like school choice, where you can help people break out of poverty. But these are the very things that the left are viciously fighting, because they put the interest of teachers unions ahead of the interest of black children.
AMY GOODMAN: Dan Mitchell — or rather, David Harris.
DAVID HARRIS: Well, this really isn’t an issue about left or right. I mean, you have Olympia Snowe coming out, saying — Senator Olympia Snowe, Republican of Maine, coming out, saying we should do something about this. Former Speaker of the House, Newt Gingrich, saying Congress should address this. This is really about which kids are included. Our country has decided to have a child tax cut. It came out of the Contract with America in 1994, passed in 1997 and expanded by President Bush. President Bush has said we should expand the child credit in 2003. And so, here we have a credit that’s $47 billion. And what we’re saying is that perhaps the waitress should also be — the child of a waitress should also be getting $1,000 credit that the people she serves gets.
DAN MITCHELL: How do you give a tax cut to people who don’t pay taxes? That’s income redistribution. Do you want to make America more like France with double-digit unemployment and economic stagnation?
DAVID HARRIS: I don’t believe it’s French to say that leaving out half of African American children and half of Hispanic children, over a quarter of all children, the vast majority in working families, from the child credit. That seems to me it’s an issue of fair — of right and wrong.
DAN MITCHELL: How do you give a tax cut to people who don’t pay taxes?
DAVID HARRIS: These are people who are paying significant payroll, state and local taxes, and because we have designed the child credit through the tax code, have essentially been left out of it.
AMY GOODMAN: Dan Mitchell.
DAN MITCHELL: I still come back to the first thing I said. If we have a tax cut, the child tax credit, how are you going to give that to people who don’t earn enough income to pay taxes? In effect, what’s being said here is that we should turn a tax credit into a form of income redistribution, and that is making America more like France or some of the high tax European welfare states that have such economic misery and double-digit unemployment. We don’t want to go down that road. We want opportunity, we want job creation, we want better economic performance, and those aren’t the things you get through income redistribution. We have had $6 trillion on the war on poverty, and it’s created the problems in New Orleans. It doesn’t solve them. Government is the problem, not the answer.
DAVID HARRIS: This is a program that we have that’s $47 billion a year, and when you look at who doesn’t get the full credit, you’re talking many of the families of the armed services, in addition to waitresses and home health workers. The question is: If we’re going to have a child credit (and we’ve decided to have one. It came out of the Contract with America and was expanded by President Bush) — if we’re going to have one it seems to me that we should be including looking at these other families who are working, playing by the rules, and who also have kids with needs.
DAN MITCHELL: Well, what you’re really saying is, you want to turn the tax credit into just a form of government payment to everybody, which would be a form of income redistribution. And, again, I come back to: Show me any country in the world that has ever prospered and grown and created economic opportunity by having higher taxes and more redistribution. That entire model has collapsed in the former Soviet bloc. That entire model is responsible for the economic stagnation of Western Europe. We want free markets and individual responsibility and individual opportunity here in America. I don’t want to go down the route of countries that have failed because they pursued too much income redistribution.