Read Fine Print In `Child Credit' Tax Plans

WASHINGTON - Bill Clinton and Bob Dole both promise tax credits of $500 per child, but analysts say most families shouldn't bank on them.

Though both candidates have built their campaigns around tax cuts for the middle class, neither would give the full $500 credit to most American children, according to independent analysts.

And many of America's poorest families, already hit by welfare cutbacks, would see their taxes go up under the Dole plan, said Robert McIntyre, director of the liberal Citizens for Tax Justice.

If the math seems odd in terms of child welfare, McIntyre said, it may add up politically: "It lets them give a lot of money to a limited number of people."

Those people - middle-age and middle- to upper-income - are among the nation's most likely voters, said Lydia Saad, managing editor of the Gallup Poll.

Reform Party nominee Ross Perot dismisses both his rivals' tax-cutting packages as "election-year candy," saying the best gift the nation can give its children is a smaller national debt.

Far-larger scope

The Republican overall tax-cutting plan is far larger than Clinton's: about $550 billion over six years. Clinton proposes $176 billion over the same period.

But when analyzing the child-tax credits within those totals, Citizens for Tax Justice found that both candidates' proposals would benefit only a fraction of taxpaying households. Dole's credit would affect 20 percent; Clinton's only 16.2 percent.

Put another way, the Dole plan would grant some tax relief to 39.7 million of the nation's 72.9 million children, according to Ken Kies, staff director of Congress' Joint Committee on Taxation.

Kies said the Clinton plan would give some tax relief to families of 29.4 million children. The White House says 37 million.

Both plans have fine print

Still, the two plans' effect would be even more limited than those figures suggest, independent analysts say.

Because Dole's credits are phased in and out over a broad range of incomes, fewer than half of all children would qualify for the full $500 credit, according to the labor-oriented Center on Budget and Policy Priorities.

And even if the White House is correct in its estimate of the number of children affected by the Clinton tax plan, many of those youngsters would get only a partial credit. Clinton's maximum credit begins at only $300 annually and won't hit $500 until 1999.

The president defends a "targeted" approach as being all the federal government can afford without cutting critical services or ballooning the federal deficit.

"If the government goes in and borrows money at the same time you're trying to, what will happen? Interest rates will go up," he told a recent rally. "If that happens, your mortgage payment, your car payment, your credit payment will go up. Folks, would you go to the bank yourself and borrow money to give yourself a tax cut?"

Dole counters that Clinton's plan is laughably small. "His tax cuts are targeted. They'll miss all of you," he recently told a Republican crowd.

According to Citizens for Tax Justice, the truth of Dole's claim would depend on a voter's income.

Dole's child tax credit covers significantly fewer working-poor children than Clinton's, and far more wealthier children.

The Dole plan also calls for giving away far more money from the start. His credit covers children up to age 18. Clinton's ends at age 13. And Dole promises $500 credits from the start.

Poor families may not benefit

At the lower end of the income scale, Dole would grant the child tax credit only to families that owe federal income taxes after accounting for the Earned Income Tax Credit, or EITC, which is designed to offset both payroll and income taxes.

Clinton's child credit would be granted without first subtracting EITC payments.

For families earning $20,000 to $30,000, that can make a big difference. For instance, a family with two children earning $23,695 would owe $1,005 in income tax and qualify for $1,023 in EITC payments.

Under Clinton's plan, the family would get a full $500 credit for each of its children. Under Dole's plan, it would get nothing. Also, because the Dole plan calls for cuts in the EITC, the family could face higher taxes.

Families with more children or large itemized tax deductions could approach incomes of $30,000 before they qualified for the Dole credit, according to the Center on Budget and Policy Priorities, a labor-oriented think tank.

Overall, officials of the think tank said, Dole would exclude 40 percent of all children from the credit because their parents are too poor. Another six percent would get only partial credits, for the same reason.

By setting lower income limits, the center said, the White House plan would aid several million additional children in working-poor families.

Is $150,000 "middle class?"

Differences between the two plans are equally large at higher incomes.

For married couples, Clinton would phase out his credit at incomes between $60,000 and $75,000. Dole's credit would go to families earning twice as much. It phases out at incomes between $110,000 and $150,000.

That ceiling causes some analysts to question Dole's description of his proposal as a boon to "low- and middle-income families in America."

"There are some definitions that say the middle class goes . . . up to $150,000, but it's a pretty strange definition. The median income in the country is about $35,000," said Demetri Coupounas, director of policy for the fiscally conservative Concord Coalition.

The Joint Committee on Taxation priced Dole's child credit at $75 billion over six years. The Congressional Budget Office said Clinton's plan would cost $64 billion over the same period.

White House adviser Gene Sperling said Clinton has aimed his credit at families with small children because those with older children can take advantage of new credits for educational expenses.

"We plan to give families help when they need it most - when they're raising young children and when they're sending kids to college," said Sperling, deputy assistant to the president for economic policy.

Dole rejects Democratic claims that his plan would blow a hole in the federal budget. He says Republican leaders in Congress and the White House will ensure that spending cuts offset the tax cuts.

"What it's really going to do is blow a hole in his (Clinton's) lead," Dole said.

Regardless, says political analyst William Schneider of the conservative American Enterprise Institute, this is not a big deal for most voters.

"Most voters, if asked, would rather have the (tax-cut) money," he said. "But it's not going to solve a major problem for most Americans. Politically, it's not a big deal."