President Joe Biden’s push to make the expanded child tax credit permanent has faced opposition from some Democratic lawmakers, with negotiations for his broader economic and social programs resulting in a one-year extension through next year. Despite this concession, the president continues to fight for a legacy-making policy that could become the equivalent of Social Security for children, believing that the reduction of child poverty would be transformative. However, Republican critics and West Virginia Sen.
Joe Manchin worries that the payments could discourage parents from working, while supporters say the money would make it easier to afford child care and transportation needed to find jobs. The child tax credit was initially bipartisan, with Republicans and Democrats finding common ground on the issue of supporting families with children. The credit’s evolution since being created in 1997 reflects the power of using the tax code for social policy and allows Democrats to claim the mantle of middle-class tax cutters, while Republicans who oppose the idea could be criticized for favoring tax hikes on this key group of voters ahead of the 2022 elections.
“It’s a flat-out tax cut for ordinary people,” Biden said in a Wednesday speech in Scranton. “That’s what it does. I make no apologies for it.”
The continuation of the payments of at least $300 a month per child is as much about a political transformation as an economic one.
For the purposes of the federal budget, it is a tax cut aimed squarely at the middle class as median family incomes are at $86,372. The credit’s evolution since being created in 1997 speaks to the power of using the tax code for social policy.
It allows Democrats to claim the mantle of middle-class tax cutters, while Republicans who oppose the idea could be criticized for favoring tax hikes on this key group of voters ahead of the 2022 elections. That is a sharp reversal from the Ronald Reagan-era identity of Republicans as committed to tax cuts for aiding growth.
“A lot of its initial success was that it did fit into the frame of tax relief,” said Gene Sperling, a Biden aide who worked on economic policy in both the Clinton and Obama White Houses. “This is one place where progressives have over a period of 30 years kind of won the conceptual war.”
The child tax credit was initially bipartisan, a unique policy overlap between former President Bill Clinton and former House Speaker Newt Gingrich.
Republicans made it part of their 1994 “Contract with America,” a list of polices that former Georgia Rep. Gingrich rode to the House speakership. Gingrich said in an interview that former Illinois Rep. Henry Hyde, a staunch abortion opponent, emphasized that the GOP needed to show that it cared about children after they were born, not just when they were in the womb. The tax credit was the chosen vehicle.
Clinton separately proposed it in December 1994 in his “middle class bill of rights” speech. The convergence ultimately led to the 1997 overhaul of welfare that established a $500 tax credit for children. Future administrations expanded the credit. But until this year the credit was not “fully refundable” — which meant that parents with low incomes might not earn enough to receive the full payment.
What Biden and Democratic lawmakers did with their coronavirus relief package was remove that limit, effectively turning the tax credit into a monthly child allowance. Their planned extension would make this change permanent.
Gingrich and Republicans say people would quit their jobs because they would be able to receive payments without working, depriving children of working parents who can serve as role models.
He calls that “an enormously dangerous thing for our culture.”
Backing that argument is a paper by University of Chicago economists that assumes the expanded tax credits would cause 1.5 million parents to ditch their jobs because the credits would no longer be tied to working.
“It’s a policy that’s been transformed from one that encourages self reliance and work to one that doesn’t,” said Bruce Meyer, the University of Chicago professor who co-wrote the analysis.
However, real world economic data shows no correlation between the payments and people leaving work so far. Researchers at Columbia University have found that the expanded child tax credit payments that began in July had no impact on labor and that models claiming otherwise are overly simplified. Workers often need to spend money in order to get a job, they reason.
“You have to make an investment in order to be able to work,” said Elizabeth Ananat, an economist at Barnard College who co-wrote the Columbia paper. “You do have to get your car fixed. You have to get your phone turned back on. You have to buy a month supply of diapers in order to secure your spot in the preschool.”
Democratic lawmakers believe the payments reduce poverty and improve educational outcomes, making it more likely that the children will hold steady jobs as adults.
Colorado Sen. Bennet backed the idea of a child tax credit after he found as a school administrator that more resources were needed to ensure kids had the stability to succeed.
“Most of the parents are working incredibly hard, some of them working two and three jobs. And no matter what they do, they couldn’t keep the kids out of poverty,” Bennet said.
DeLauro says the breakthrough on expanding the credit came as a result of the coronavirus showing how economically fragile many families are and Biden’s own choice as a presidential candidate to support the policy. She believes that beneficiaries will keep their jobs because work is part of who they are.
The child tax credit has evolved since its creation in 1997, reflecting the power of using the tax code for social policy. The credit was initially a bipartisan effort and has now become a significant policy issue for President Joe Biden. The extension of the payments of at least $300 a month per child is both an economic and political transformation, allowing Democrats to claim the mantle of middle-class tax cutters. However, some Republicans and Democratic lawmakers oppose the idea, arguing that it could discourage parents from working. Despite this opposition, the continuation of the payments is seen as a way to reduce child poverty and improve educational outcomes, making it more likely that the children will hold steady jobs as adults.
What is the child tax credit?
It is a tax credit that provides a monthly allowance for families with children, aimed at reducing child poverty.
Who initially proposed the child tax credit?
It was proposed by former President Bill Clinton and former House Speaker Newt Gingrich in 1994.
Why are some Democratic lawmakers opposing President Biden’s push to make the expanded child tax credit permanent?
They worry that the payments could discourage parents from working.
What is the Republican criticism of the child tax credit?
They worry that the payments could discourage parents from working.
Why do supporters say the child tax credit is beneficial?
They say the money would make it easier to afford child care and transportation needed to find jobs.
What does President Biden believe about the child tax credit?
He believes that the reduction to child poverty would be transformative.
What is the significance of the child tax credit to Democrats?
It allows them to claim the mantle of middle-class tax cutters.
Why is the child tax credit seen as a political transformation?
It is aimed squarely at the middle class, allowing Democrats to claim the mantle of middle-class tax cutters.
What is the concern of Republicans about the child tax credit?
They believe that people would quit their jobs because they would be able to receive payments without working.
What does real-world economic data show about the child tax credit?
So far, it shows no correlation between payments and people leaving work.