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Lee-Rubio Child Tax Credit change takes aim at penalties for families

Their new proposal would increase the credit to $3,500 a year for school-age children and $4,500 for younger children.

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Sen. Mike Lee, R-Utah, left, listens as Sen. Marco Rubio, R-Fla., speaks during a news conference on Capitol Hill in Washington on March 4, 2015. Lee and Rubio hope to expand the child tax credit again, three years after they fought to double the credit to $2,000 and make more of it refundable to reach more families in need.

J. Scott Applewhite. Associated Press

U.S. Sens. Mike Lee, R-Utah, and Marco Rubio, R-Fla., hope to expand the child tax credit again, three years after they fought to double the credit to $2,000 and make more of it refundable to reach more families in need.

Their new proposal would increase the credit to $3,500 a year for school-age children and $4,500 for younger children.

While they said that American families need and deserve some help, they took a strong stand against turning the credit into what has been called a child allowance, paid to families on a monthly basis. Rather, the credit should remain in the tax code, paid out when taxes are filed, the said.

By making a portion of the credit refundable, they said they will reach families that don’t make enough to have to file taxes. But the two want the credit to reward work, as well, and that’s in its design. To get the full credit, an individual or couple would need adequate income from paid work to qualify.

“We are encouraged by recent proposals to increase tax relief for working families. Upon our initiative, the 2017 Tax Cuts and Jobs Act doubled the Child Tax Credit and expanded its eligibility to provide significant tax cuts to working parents with children,” they said in a joint statement recently.

“We have long said that the Child Tax Credit must be further increased to help working families. In the current pandemic relief bill under consideration, we would support increasing the Child Tax Credit to $3,500, and $4,500 for young children.” they said,

The increase to $4,500 for young children eliminates a penalty for stay-at-home parents, according to Lee. Right now, parents may also qualify for a childcare tax credit. But their proposal eliminates that credit and instead would give the added $1,000 for young children, whether parents use daycare or not.

A number of proposals are circulating for how best to help parents with the cost of raising children — and the issue is surfacing at the same time that the U.S. fertility rate has been dropping. Demographers like Pamela S. Perlich, director of demographic research at the University of Utah’s Kem C. Gardner Policy Institute, say that if the number of children being born drops too significantly, there could be big future ramifications. Among those impacts are a less robust economy, a decrease in entrepreneurship and increased pressures on those children as they age into the work force and find they have to support both children of their own and a social safety net for older adults that is larger than the younger generation of workers.

“Really, it comes down to support for young families and restructuring the institutions of work and home life in a way that younger people will feel economically secure in having more kids,” Perlich recently told the Deseret News. Parents and people who would like to be parents but feel they can’t afford it lament the high cost of raising children, including housing and food, among others.

Sen. Mitt Romney, R-Utah, has proposed giving families what amounts to a child allowance, paid monthly through the Social Security Administration. But neither Lee nor Rubio support a child allowance, in part because they say it hampers efforts to ensure parents work.

“We do not support turning the Child Tax Credit into what has been called a ‘child allowance,’ paid out as a universal basic income to all parents. That is not tax relief for working parents; it is welfare assistance,” they said in their joint statement. “An essential part of being pro-family is being pro-work. Congress should expand the Child Tax Credit without undercutting the responsibility of parents to work to provide for their families.”

In a video explaining their proposal, Lee uses the example of two high-earning parents to point out what he calls “the parent penalty.” The video introduces a third family in which parents work outside the home and receive money from the Child Care Tax Credit, “even though they already make more” than the other two families. That exposes, the video explains, a stay-at-home parent penalty that President Joe Biden’s proposals would make much worse.

Key features of the proposal backed by Biden include increasing the Child Tax Credit to $3,000 from its current $2,000 per child and make it fully refundable, so that very-low income families would qualify. The credit would increase to $3,600 for children under 6, with a phase-out income cap. Payments would be made monthly beginning in July, if the IRS could be ready in time.

CNBC quoted Rubio objecting in an op-ed to the Biden-backed proposal. “If pulling families out of poverty were as simple as handing moms and dads a check, we would have solved poverty a long time ago.”

An analysis of 2018 tax credit data after the duo pushed to expand the Child Tax Credit in 2017 showed that the number of people receiving the credit doubled, “benefiting American families in every income bracket with the exception of top income earners,” Rubio’s office announced in a 2019 press release.