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Federal Income Tax Thresholds for Selected Years: 1996 through 2006 , Record No.: RS22337, Date: November 29, 2005 1 (November 29, 2005)

handle is hein.tera/crstax0561 and id is 1 raw text is: Order Code RS22337 November 29, 2005 CRS Report for Congress Received through the CRS Web Federal Income Tax Thresholds for Selected Years: 1996 Through 2006 Gregg Esenwein Specialist in Public Finance Government and Finance Division Summary One principle of tax fairness or equity accepted by many is that households at the low end of the income spectrum, especially those near the poverty threshold, should not be subject to the federal income tax. Federal income tax thresholds are high enough that, with the exception of single taxpayers, the equity principle of exempting poverty level households from income taxation has been achieved over time. The introduction and subsequent increase in the child tax credit, however, have significantly increased the income tax thresholds for households with children. For households with children, the income tax thresholds are now substantially higher than the comparable poverty thresholds. In fact, the child tax credit represents a departure from past policy practices because it is not designed primarily as a means of differentiating between families of different size at or near the poverty threshold, but rather is designed to provide general tax reductions to middle and upper income taxpayers with dependent children under the age of 17. The recent increases in the child tax credit are scheduled to sunset (expire) in 2011. As a result, it is likely that Congress will revisit the issue of the child tax credit because, absent legislative action, the credit will decline from its current law level of $1,000 to $500 in 2011. This report will be updated as new data become available or as events warrant. The maj or structural components of the income tax code which influence the income levels at which households become subject to federal income tax include the standard deduction, the personal exemption, the child tax credit, and the earned income tax credit (EITC). Each of these items increases the income level at which an individual or family incurs an out-of-pocket federal income tax liability.' The child and dependent care tax credit might also influence a household's federal income tax threshold, but it is not addressed in this report because it is not widely used by households at the lowest end of the income spectrum. Congressional Research Service oe The Library of Congress

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