Tax-cut questions and answers

Author: Brian Tumulty

Published: September 24, 2004

WASHINGTON - The Working Families Tax Relief Act of 2004 is the fourth major tax cut to be considered by Congress in four years.

QUESTION: Who are the primary beneficiaries of the cut?

ANSWER: About 31 million families with dependent children under age 17 would be able to continue claiming a child tax credit of up to $1,000. Millions of married couples would be able to claim more favorable deductions, and all filers would be eligible for a 10 percent tax rate on a set amount of their initial income.

Q: Is there anyone who loses?

A: About 4.4 million low-income families earning up to $26,000 would either get smaller child tax credits or lose them altogether because eligibility is subject to inflation indexing, according to the nonpartisan Tax Policy Center. The group also estimates that 68 percent of the tax relief would go to families with incomes of $79,560 and more.

Q: Why would a family lose its eligibility for the child tax credit?

A: Back in 2001, a partial child tax credit could be claimed by families making as little as $10,000. But because of inflation indexing, the floor is $10,750 this year. Next year, a family would have to earn at least $11,000 to claim the credit.

Q: How does the marriage-penalty relief work?

A: The 15 percent tax bracket is increased for married couples filing joint returns to double the income of single filers. The standard deduction also would be double the amount of a single person's. Both expire after 2010.

Q: Who is eligible for the 10 percent tax bracket?

A: All tax filers with taxable income. For 2004, the bracket covers the first $7,150 in taxable income for singles and $14,300 for married couples filing jointly. The ceiling would be indexed for inflation in 2005 through 2010. The tax bracket expires in 2011.

Q: What corporate tax cuts are in the bill?

A: Almost $13 billion in tax relief involves 23 business provisions. Most extend current tax breaks.