Child tax credit bill faces an uphill battle

This week, President Joe Biden sealed a major legislative victory with the signing of the Inflation Reduction Act (IRA), a sweeping part of his administration’s domestic policy agenda that includes measures to lower prescription drug prices, curb rising energy costs and combat the climate crisis.

Though it was hailed by Democrats as a much-needed victory for his presidency in this fall’s midterm elections, the plan that was turned into law was significantly scaled back.

One of the bill cuts was an extension of a pandemic expansion of the federal child tax credit, increasing benefits for families from the current $2,000 per child to $3,000 for children under 18 and $3,600 for children aged 6. years or younger.

While some, like Vermont senator Bernie Sanders, proposed extending that expanded credit in the IRA for five years, the Senate eventually rejected the measure in a bid to get the votes the latest $740 billion package needed to to pass.

But talks about reviving the expanded child tax cut — which the White House has labeled the key driver behind reducing child poverty to record lows in 2021 — may not be over yet. Although Sanders’ proposal backfired, senators such as Utah Republican Mitt Romney and Montana Republican Steve Daines have expressed interest in reviving discussions around an expanded child tax credit, laying the groundwork for a future deal.

Child Tax Credit
New Hampshire parents and other supporters gather outside U.S. Senator Maggie Hassan’s office to thank her for the payments of child tax credits and demand that they be made permanent, on September 14, 2021, in Manchester, New Hampshire. One of the provisions of the Inflation Reduction Act that was scrapped to secure the bill’s passage was an extension of a pandemic extension of the federal child tax credit that increased benefits for families from the current $2,000 per child to $3,000 for children. under 18 and $3,600 for those 6 or younger.
Scott Eisen/Getty Images North America

“I am thrilled to be working with my colleagues on a framework that is pro family, pro work and pro life,” Daines said in a statement to News week. “In light of the Supreme Court’s decision in dobbs, we must not only protect every child from the law, but also expand our commitment to support and encourage family growth. This will be a big boost for parents and families who don’t raise the debt and make federal policy work better for families across the country.”

The Republican proposal — announced by Romney’s office in June — offers a tax credit of $4,200 for children ages 5 and under and $3,000 for children ages 6 to 17. Some parents may also qualify for a $2,800 pregnancy credit within four months of their child’s due date, with the option to receive four $700 monthly installments.

However, the bottlenecks for Democrats that could hinder the Republican proposal lie at some of the plan’s finer points. The Republican plan would be paid for by abolishing the federal state and local tax deductions (SALT), which groups like the Tax Policy Center believe could adversely affect low- and middle-income earners.

The Republican plan also proposes imposing annual income requirements of $10,000 to qualify for the plan, a restriction that some economists believe could put a large portion of Americans looking to help the child tax credit. According to the left-wing Center for Budget and Policy Priorities, about 27 million children received less than full credit or no credit at all because their families earned too little to qualify for the credit ahead of the 2021 expansion through the pandemic-focused U.S. bailout.

“How hard do we have to compromise that we would be willing to adopt something like the Romney plan, which will basically push several million children into poverty or even further into poverty?” said Stephen Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy (ITEP). ‘That is a good question. And that strikes me as a very high price to pay.’

However, the biggest problem for Republicans is not just approving the bill, it’s also finding a way to pay for it. Sanders’ plan, like the proposal passed in 2021, will have no income or work requirements and will be funded by an increase in the top federal corporate tax rate from 21 percent to 28 percent, a proposal likely to be a no-start for Republicans. .

“I think people got really caught up in the idea that they liked the US bailout policy because it gives people money and works directly to reduce child poverty, etc. But they didn’t really realize how expensive it was,” he said. Marc Goldwein, senior vice president and senior policy director of the center-right Committee for a Responsible Federal Budget. “It’s over $100 billion a year. It’s a lot of money.”

The White House and other public policy groups believe that the additional effects of a more aggressive child tax credit could have significant benefits that outweigh the costs of the program. A 2021 analysis by Columbia University’s Center on Poverty and Social Policy found that an expanded child tax credit would provide a monetary benefit eight times the annual cost through long-term savings through improved child health, education and future income.

Economists argue that similar expansions of rights programs in American history have also brought significant benefits to society, including through programs such as Social Security.

“In setting Social Security, policymakers have decided that the US should not tolerate high levels of poverty among older adults,” said Kris Cox, deputy director of federal tax policy at the Center on Budget and Policy Priorities. “Without Social Security benefits, 38 percent of the over-65s would be living in poverty, but if we factor in Social Security benefits, that number drops to 9 percent, a dramatic reduction. The expansion of the tax credit for children was a similar opportunity for policymakers to saying we should no longer tolerate the level of child poverty we see in the US, but instead the extension of the child tax credit expired and child poverty rose by about 40 percent in January.”

Ultimately, it’s up to Congress to strike a deal — an area where Goldwein believes both sides have freedom of movement.

“I wouldn’t let the perfect be the enemy of the good,” Goldwein said. “I understand there’s a lot you can do to better target this credit towards low-income families, who may not give you the whole living, but there are a lot of things you could do, like slow the phase-in — that would might not get rid of the labor requirement, but would have significant implications for poverty reduction.”

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