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WSJ: New Definition Of a 'Child' Causes Outcry (tax, not abortion topic)

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question everything Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-04-06 11:57 AM
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WSJ: New Definition Of a 'Child' Causes Outcry (tax, not abortion topic)
The Wall Street Journal

TAX REPORT
By TOM HERMAN

New Definition Of a 'Child' Causes Outcry

Congress's Move to Simplify The Tax Code Creates Loophole For Some Wealthy Families
March 1, 2006; Page D1

Defining the term "child" sounds simple -- except at tax time.

There are at least five different tax breaks tied to children and until recently, the tax code had a separate test for each. Recognizing the absurdity and inefficiency of that, Congress enacted legislation in late 2004 streamlining the definition of a child. The new system took effect for 2005 tax returns, which people are preparing now. But the new law has ended up creating loopholes allowing some high-income families to get tax benefits that weren't intended for them -- such as the earned-income tax credit, which is intended for low-income workers. At the same time, some low-income families are finding themselves unable to claim benefits that they should be getting.

Some lawmakers and tax experts are up in arms about what they say are the law's unfair consequences. Coming up with a fair solution is tricky not only because of the Internal Revenue Code's complexity but also because of the varied types of households and living arrangements in the U.S. today. Treasury officials have proposed a remedy, which they say would raise $2.6 billion for the government over 10 years, mainly by closing tax loopholes for the rich. But it's unclear whether Congress will act, especially since this is an election year and lawmakers face many other pressing issues. Some critics also fear that the proposed remedy could create new inequities for taxpayers.

(snip)

Most families probably won't be affected by the change. But for some high-income earners the law could be a boon. This is especially true for wealthy families with two or more children living at home, where one or more of the kids has taxable income, especially income from a job.

Francis Degen, president of the National Association of Enrolled Agents, which represents about 40,000 private-sector tax specialists, offered this example: A couple with two children living at home -- a 14-year-old daughter and a 22-year-old son -- file a joint return with adjusted gross income of $400,000. At that level of income, the parents don't get any tax benefit from claiming the daughter as a dependent. On the other hand, the son, who has $15,000 in wages and isn't a full-time student, can claim his sister, enabling him to receive the child-tax credit and earned-income tax credit. Assuming he had no tax withheld, this turns what would have been a balance due of $683 on his return to a federal income-tax refund of $3,158.

(snip)

URL for this article:
http://online.wsj.com/article/SB114117473531185968.html (subscription)

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ayeshahaqqiqa Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-04-06 12:04 PM
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1. Steal from the poor, give to the rich
Now the rich are getting the child credit and poor are denied? Where is JUSTICE???????
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question everything Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Mar-04-06 12:55 PM
Response to Reply #1
2. Whose definition of "justice?"
If you are an oilman and you invade a major oil producing country, while killing ten of thousands of people and maiming even more - where is justice?

If you give a tax break to the wealthy and cut programs to the poor - where is justice?

If you cut capital gain taxes and eliminate estate taxes - assuring the continuing buildup of wealth, while keeping payroll taxes intact - where is justice?
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