Bruce Bartlett

Conservatives everywhere were celebrating last week with the announcement that Howell Raines was forced out as executive editor of The New York Times. Raines had pushed the paper yet further to the left and had done so in ways that were intended to be as irritating to conservatives as possible. So his forced resignation over the Jayson Blair scandal was as sweet for them as Richard Nixon's 1974 resignation from the presidency was for liberals.

But if any conservatives thought that the Times was going to stop being a thorn in their side, they quickly got a wake-up call on the child tax credit. David Firestone, its congressional correspondent, jumped on this story almost before the ink was dry on the new tax bill and made it an issue they had to deal with.

In brief, the story is this. The version of the tax bill that passed the Senate included a provision that increased refundability of the child credit, which is being raised from $600 to $1,000. Under current law, the credit is refundable for those with an income tax liability less than the credit to which they are otherwise eligible. But refundability is limited to 10 percent of a taxpayer's earned income above $10,500. It is scheduled to rise to 15 percent in 2005, and the Senate would have speeded up that increase to this year. The House had no such provision.

House and Senate conferees were all willing to raise the refundability limit in the final legislation but were derailed by one senator, George Voinovich (R-Ohio). He and Sen. Olympia Snowe (R-Maine) are those principally responsible for shrinking President George Bush's original tax plan from $725 billion to $350 billion. As their price for voting in favor of the budget resolution, which was necessary to get a tax bill through the Senate, they extracted a personal promise from Sen. Charles Grassley (R-Iowa), chairman of the Finance Committee, that no bill larger than $350 billion would come out of conference.

Based on Grassley's promise, Snowe and Voinovich supported the budget resolution. But it turned out that there was some misunderstanding by Grassley on what he had promised. He thought that the $350 billion cap applied only to the tax cut; any spending provisions included in the legislation would be on top. This was important because $20 billion in aid to the states was necessary to get the vote of Sen. Ben Nelson (D-Neb.), and there was $10 billion in spending for the refundable portion of the child credit and other provisions of the tax bill.


Bruce Bartlett

Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.

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