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Democrats Prepare Tax Bill Benefiting Low-Income Workers

Democrats, upset that the lowest wage earners will not benefit as much as the wealthy from the latest tax cut, hope to introduce another tax bill when Congress reconvenes Monday.

After President Bush signed the $350 billion tax package Wednesday, newspaper accounts revealed that a provision aimed at the working poor was removed from the conference report.

Workers earning between $10,500 and $26,625 are not able to take full advantage of the increase in the child deduction, which was bumped up from $600 per child to $1,000, according to the Center on Policy and Budget Priorities.

For example, married families with one child earning between $10,500 and $16,500 will receive no benefit. The same goes for those earning up to $26,625 who have three children, according to the liberal think tank.

A Senate-adopted provision would have assisted 11.9 million children in low-income working families, according to the organization. But negotiators dropped the provision to keep the total package within the Senate’s $350 billion ceiling. Those minimum-wage families would have received a refund from the federal government since their tax credits would have exceeded their tax liability.

“The obvious solution to this problem is to immediately pass correcting legislation that restores accelerated refundability of the child credit and pays for the added cost by reducing the bill’s tax breaks for the very wealthy by a corresponding amount,” Senate Minority Leader Tom Daschle (D-S.D.) wrote Bush in a letter dated Thursday.

“This will keep the total cost of the tax bill within the $350 billion cost estimate of the Joint Committee on Taxation,” he wrote, adding that key Senators have refused to approve tax cuts exceeding $350 billion.

“If you are willing to support such legislation, I can assure you that it will have strong Democratic support and easy passage in the Senate,” he wrote. “With your support, it could be the first order of business when the Congress reconvenes next week.”

The White House has tried to deflect criticism by saying the package was aimed at those who pay taxes. Giving a refund to those with the smallest tax burden is a different debate, White House spokesman Ari Fleischer told The New York Times.

A spokesman for House Minority Leader Nancy Pelosi (D-Calif.) said he expects Democrats to introduce a bill to address the issue upon returning to Washington next week.

The House Ways and Means Committee, however, will be busy trying to reform Medicare in June, according to a spokesman.

But the Democratic proposal might face a more receptive audience in the Senate. Finance Chairman Chuck Grassley (R-Iowa) had wanted to extend the benefit to the poorest workers, a committee spokesman said.

Grassley voted for it in committee and supported its inclusion in the final package, the spokesman added, but the House did not want to include any offsets and the Senate was hemmed in by the $350 billion ceiling.

Grassley will “take a look” at whatever the Democrats propose, she added.

Pelosi criticized Republican negotiators for omitting the provision.

“While the Republicans tax break leaves no business behind, it leaves behind millions of children from working poor families,” Pelosi said in a statement Thursday. “Faced with a choice between giving a tax break to an elite few or helping millions of working families, the Republicans once again chose to help their wealthy friends.”

Democrats are blaming the change on Bush’s proposal to eliminate taxes on dividend income, as evidenced by Daschle’s letter.

“This provision was dropped from the bill by Republicans at the last minute in order to make room for the largest possible tax breaks for the wealthy, including your top priority, the dividend tax break,” he wrote to Bush.

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