Federal Income Tax Thresholds for Selected Years: 1996 Through 2006

Publication Date: November 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

Type:

Abstract:

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.