Tax credits don?t always help the poor

Author: Greg Mathis

Published: October 21, 2005

When it was passed four years ago, the federal Child Tax Credit (CTC) joined the Earned Income Tax Credit (EITC) as a key source of income support for poor working families and their children. Publicized as a way to "put money back into the hands of those who need it most," the CTC has become an important part of what is considered the largest federal anti-poverty program. However, the poorest of America's families, most of them Black and Hispanic, aren't benefiting from the credit. At a time when the Bush administration has vowed to seriously address the needs of low-income and minority families, it's time that these tax credits are adjusted so they truly benefit the nation's most needy families.

In the simplest of terms, the CTC reduces a family's tax burden or increases the amount of a filer's tax refund check. To receive the credit, a worker has to earn more than $10,750 a year. Single parents with annual incomes of up to $75,000 and married parents with combined incomes up to $110,000 are allowed to take the maximum deduction of $1,000. As income increases beyond these levels, the credit is reduced. The CTC allows families to reduce their tax liability before taking the EITC, which is basically a credit for people who work but don't earn a lot of money. These credits are considered important anti-poverty tools because the amount of money a low-income family has to work with is increased - the tax credit can then be put towards living expenses.

Unfortunately, many American children, especially children of color, aren't eligible to receive the CTC. A study recently released by the Tax Policy Center reveals that more than 50 percent of Black families earn less than the $10,750 required to qualify for the credit. Black families aren't the only ones that are missing out on this benefit: 47 percent of Hispanic families don't qualify either. The study shows that over 19 million American families - nearly 75-percent of them are working families - regardless of race, are too poor to receive the full benefit. In theory, the tax credit is a good idea: low-income workers get money back to pay for expenses such as childcare and medical bills. At its core, the CTC is little more than middle-class tax relief. Those that truly need it most aren't getting the break they deserve.

In the wake of Hurricane Katrina, a disaster that opened mainstream America's eyes to the class and racial disparities in this country, President Bush promised to 'uplift' the poor. If the president wants to stay true to his word, he can begin by lowering the annual income limits for the CTC, opening the door for more families to get much needed financial relief. Such a change would make a significant difference in the lives of many poor families across this country and be a real step towards combating poverty.

Judge Greg Mathis is chairman of the Rainbow PUSH-Excel board and a national board member of the Southern Christian Leadership Conference.