Let's Cut Child Poverty Again. Expanding The Child Tax Credit Works!
With Congress hoping to pass an omnibus government funding package before the Christmas break, and the handover of the House to Republicans in January, there's a scramble to cram in some last-minute deals on big priorities for both parties.
Republicans want all the tax advantages they can throw at businesses, and Democrats, those nuts, want things that will actually help people of the non-corporation variety. To get anything through the Senate, Democratic negotiators will need to get 10 Republicans to agree, in order to avoid a filibuster. Several leading Democrats want to see if they can leverage the Republican desire to help businesses get richer as a way to win support for expanding the Child Tax Credit (CTC), which would help lift millions of American children out of poverty.
Or really, we should say expanding the Child Tax Credit would lift millions of kids out of poverty again, because during 2021, while the American Rescue Plan's expanded CTC was in place, child poverty rates dropped by 46 percent, according to Census Bureau data. It was an enormous help to low-income and even middle-class families, providing them with that "little bit of breathing room" that Joe Biden likes to invoke. The research into the program showed that it definitely reduced child poverty, and despite conservatives fears, it also didn't deter parents from working.
But Joe Manchin and Republicans thought the credit shouldn't go to people who didn't have jobs, so they let it expire at the end of last year, and child poverty immediately began climbing again. Thanks, guys.
Child Tax Credits Are Here! Hooray!
Senate Republicans, Joe Manchin Successfully Drive 3.7 Million Children Into Poverty
This is where we get to hope for a Festivus Miracle, though: A much-loved business tax deduction for research and development is set to end on January 1, and lots of Republicans want to extend it. The changes to the R&D deduction were a bit of fiscal jiggery-pokery wedged into Donald Trump's 2017 Big Fat Tax Cut for Rich Fuckwads to make the budget score pass muster, and Republicans really want to keep it the way it has been.
Republicans also want to get that done in the omnibus package before the House goes red, because, as Politico put it back in November, “Nobody trusts McCarthy to pass anything (not even McCarthy).”
So hey, say Dems: if you want that R&D tax deduction, let's expand the CTC in some way. Even if the full 2021 expansion of the CTC won't fly with Manchin or most Senate Rs, Democrats and child advocates are willing to accept more modest improvements to the CTC, as Rachel Cohen explains at Vox. It would be great if the full expanded credit — up to $3,600 per child annually, paid out monthly — could be revived, and some Democrats have that as their goal. But at the very least, child advocates and other Dems say, let's do the most we can to help the poorest kids.
One option to expand the credit is to focus on the 19 million children under age 17 who currently receive less than the full $2,000, either because their parents earn too little to qualify or because they aren’t working at all. (These children are disproportionately Black, Latino, American Indian, or Alaska Native.)
Expanding the credit for those 19 million children — or, as policymakers say, making the credit “fully refundable” — would cost about $12 billion per year. But it’s not really the cost, advocates acknowledge, that’s the barrier to doing that. It’s that Manchin and Republicans believe it’s important for the credit to maintain some connection to working parents.
As a compromise, Democratic aides say they’re hoping they could make the credit at least fully refundable for parents of young children, or lower the amount parents need to earn to qualify for the credit’s full value.
As Cohen details, there are other options being kicked around as well, like extending both the R&D credit and an expanded CTC for only two or three years if there's no agreement to make both permanent.
But the real question is whether any deal can be made with 10 Republicans and Manchin (Remember, he's still needed, since John Fetterman won't be sworn in until January). Democrats like Cory Booker (New Jersey), Sherrod Brown (Ohio), Michael Bennett (Colorado), and others say that even though they think the R&D deduction is good, they will absolutely not support extending it unless it's paired with a deal to enhance the CTC as well. Brown, who chairs the Senate Banking committee, said in September,
I’ll put it this way, no more tax breaks for big corporations and the wealthy unless the child tax credit’s with it. I’ll lay down in front of a bulldozer on that one.
House Appropriations Committee Chair Rep. Rosa DeLauro (D-Connecticut) said at a December 7 rally for expanding the CTC that Senate Republicans need to "understand clearly and definitively that there will be no R&D tax credits" without an expansion of the credits.
Any expansion of the CTC remains a long shot, though. You might think that Mitt Romney (R-Utah), who has proposed his own version of a monthly child allowance for parents, might be interested, but he's mostly interested in doing things his way. Earlier this month, Romney told Semafor that "it’s probably not going to be until next year that we consider new legislation."
Still, where there's a tax deduction for big business, there's hope. Ain't America grand?
[Vox / Connecticut Post / Vox / Image: Video Screenshot, Economic Security Project on YouTube]
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