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For a married couple, the bill will propose a 10% bracket for the first $12,000 earned; for the single filer, the 10% tax would apply on the first $6,000. But it would be well after 2007 before inflation adjustments kick in.
Inflation stands at around 3% currently, and that is the most popular number used by those that figure this kind of stuff out. If you assume that 3%, and assume that you would get a $600 per year tax break, at the end of six years, you would have received $3,600. Wrong. Inflation will eat away $260 in the Senate version. The House version phases in things a little more slowly, so the actual returned money would be $1272 less.
This inflation effect doesn't stop there. Take that double the credit for children from $500 to $1,000. In the Senate version, inflation adjusted figures take away $236. The House version, based on that same 3% inflation would be worth $859 in today's dollars.
Income limits to qualify for this child credit are also not indexed for the effects of inflation. $110,000, the ceiling for the proposed full credit is really worth $81,100 if, of course the full credit is available in 2011. There are several million families that would not get the credit because of those numbers. That is huge and because things might be different by then. You can bet the inflation index won't be less.
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