Advocates for low- and middle-income families and several members of Congress gathered near the U.S. Capitol Monday for a news conference urging the lame-duck Congress to pair restoring the expanded child tax credit with efforts to pass the R&D tax credit before year’s end.
They echoed a recent statement by President Joe Biden that any bill that cuts taxes for large companies must do the same for working families. Some Democrats are hoping to leverage the popularity of the R&D tax credit among Republicans into a tool to bring back the expanded child tax credit.
As part of COVID-19 relief in the American Rescue Plan, Congress temporarily boosted the child tax credit from $2,000 to $3,000 for children ages 6 to 17 in low- and middle-income families, and to $3,600 for younger children. Between July and December of 2021, payments were sent directly to most eligible families each month. And the credit was made refundable, meaning families with little or no income qualified. Prior to the expansion, families had to earn a certain level of income to get the credit. In 2022, the child tax credit returned to previous levels, paid nothing for those age 17 and was not available unless families earned at least a certain level of income.
Supporters of restoring the expanded child tax credit, which ended in January, during a press briefing near the Capitol in Washington, D.C. Dec. 7. Advocacy groups, members of Congress and others lauded the credit as important for reducing child poverty, increasing family stability.
Tasos Katopodis, Getty Images for Economic Security Project
At the event, Sen. Sherrod Brown, D-Ohio, said lobbyists are lining up asking for another corporate tax cut. “It’s pretty simple. No corporate tax cuts without tax cuts for working families.”
The news conference speakers used words like “transformative” and “no-strings relief” to describe the expanded child tax credit, which the Census Bureau said halved child poverty in 2021, taking it to its lowest level historically. When the monthly payment and larger child tax credit left, close to 4 million children fell back into poverty.
A variety of advocacy groups and proponents in Congress have pushed for its return, but even a couple of months ago, their hopes for restoration of the expanded child tax credit paid monthly seemed dead. However, Republican interest in restoring the right for companies to deduct research and development (R&D) spending the same year they make the investments, instead of spreading it over a number of years, could provide a bargaining chip. Hence the push by child tax credit advocates to tie the two credits together so supporting either one supports both.
That would be easier if they’re together in an omnibus bill, something Democratic leadership is considering while the party controls both chambers for a few more weeks.
Rep. Rosa DeLauro, D-Conn., credited the monthly payments with providing financial stability that let parents feed their kids, keep the lights on and pay for gas. “It helped parents pay for child care so they could go to work and provide for their children.” She called it an effective tool in the face of inflation, helping families cope with rising costs too.
“Our ask is simple. If we can provide tax cuts for America’s corporations, we can certainly provide a tax cut for America’s kids,” DeLauro said.
Adding up financial claims
There are a number of financial claims that circulate when the child tax credit is discussed. A study from the Center on Poverty and Social Policy at Columbia University calculated that for every $1 spent on the child tax credit, $8 goes into local economies.
“I’m not sure why we have had to fight so hard when there are no losers here,” Sen. Cory Booker, D-N.J., said. “It’s not a government handout. It’s an American elevation.”
Some experts, however, dispute the numbers, saying the $8 figure is too high.
At the press briefing, one of the child tax credit expansion’s most vocal advocates, Sen. Michael Bennet, D-Colo., said the United States is the world’s richest country, yet has its third-highest poverty rate. “That’s a choice,” he said. “We can do better.”
Rep. Ritchie Torres, D-N.Y., said a “false narrative portrays poverty as a failure of personal responsibility and a product of choice. I never met a child who chose to be born into poverty.” But the consequences of that poverty haunt them the rest of their lives, he added.
Others are less happy with the details of the pandemic expansion. Sen. Joe Manchin, D-W.Va., has been among the critics of the child tax credit expansion. He maintained that because it didn’t have an earned income requirement, it discouraged parents from working.
That has been a major talking point for conservatives who are critical of the expanded tax credit, while others say the payments should be limited to low-income families. Under the expansion, couples earning up to $400,000 were eligible for at least partial benefits.
Angela Rachidi, a fellow at the American Enterprise Institute who studies poverty, told the Deseret News recently that the expanded child tax credit was not well targeted because of its inclusion of people earning higher incomes and was “confused” about what it was trying to accomplish.
Others think concerns it would discourage work are overblown.
“It’s not enough money to be a big disincentive to work. It is enough money, though, to allow someone to pay a copay on a childcare bill or afford transportation,” Elaine Maag, senior fellow at the Urban-Brookings Tax Policy Center, told The Guardian. “It is enough money to, sort of, enable work in some cases.”
Midterm potential
The midterms raised the possibility that hitching the two credits together could get the child tax credit passed. Democrats will control the Senate. Republicans will control the House, but by a much smaller margin than was expected going into the November elections. They face pressure from corporations and lobbyists to restore the R&D tax break, but will need Democrat cooperation to do so. And vice versa for the child tax credit, creating the opportunity to negotiate.
Money is a potential sticking point to a deal, since the child tax credit, if restored to its most robust form, would cost more than $1 trillion over 10 years, while the Committee for a Responsible Federal Budget estimates that the R&D tax credit would cost about $155 billion in that time. Some reports suggest Republicans may balk at the difference in what’s to be gained.
There are also suggestions that Democrats would agree to settle for less than the original expanded child tax credit in order to move a version of an expanded child tax credit forward for families. There are features that could be negotiated, from the income caps to being fully refundable, among others.
And some Republicans have shown interest in providing more help to families with a child allowance or credit of sorts.
This summer, Sen. Mitt Romney, R-Utah, along with his Republican colleagues Richard Burr of North Carolina and Sen. Steve Daines of Montana, introduced a revamped bill, the Family Security Act 2.0, that would give money every month to parents. The bill has relatively high income caps to qualify. And a requirement that families earn an income of at least $10,000 to get the full amount was added to satisfy concerns that families might choose not to work if there was no earned-income requirement.