It’s Time for a Permanent Expansion of the Child Tax Credit - Horowitz
Rób Horowitz, MINDSETTER™
It’s Time for a Permanent Expansion of the Child Tax Credit - Horowitz
That is what made the inclusion of a substantial expansion in the child tax credit in the American Rescue Plan-- which was mainly designed to counter the negative economic impacts of the COVID-19 pandemic-- of particular importance to people who work on the issue of childhood poverty. Similarly, it made its expiration at the end of 2021 and the subsequent failure of even a more limited child tax credit expansion to be included in the Inflation Reduction Act that passed this year, pronounced disappointments.
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An analysis of recently released Census Bureau data by the Center of Budget and Policy Priorities (CBPP). shows what has been lost in the failure to continue the expansion of the child tax credit. “The Child Tax Credit expansion drove child poverty sharply downward in 2021, wrote CBPP. “Combined with other relief efforts, the expansion helped lower child poverty by more than 40 percent between 2020 and 2021, reaching a record low of 5.2 percent.”
The expansion of the child tax credit accounted for nearly two-thirds of the drop in child poverty recorded in 2021. This kept 2.1 million additional children out of poverty, according to CBPP. As the well-regarded non-partisan research and policy institute points out, with the phasing out of all the elements of the American Rescue Plan, restoring at least a substantial part of the expansion is essential to preventing the gains made in reducing childhood poverty from being erased.
It is imperative for President Biden to return to his efforts to win a permanent expansion of the child tax credit. Since Republicans, such as Senators Romney and Rubio have proposed their own more limited expansions of the child tax credit, there is a possibility to assemble sufficient bi-partisan support for passage through a principled compromise on the parameters of the expansion, as CBPP and other informed observers have noted.
Under the American Rescue Act, the maximum annual child tax credit was boosted to $3,600 for children under age 6 and $3,000 for all other children, including 17-year-olds who had previously been excluded. More families were also made eligible for the maximum credit with its phase-out starting for heads of household at $112,500 of taxable income and married couples at $150,000.
A possible compromise could include reducing the income cut-off to $80,000 or so and providing at least some form of “work incentive.” While the Census Bureau data and other studies do not find a reduction in employment tied to the expansion of the child tax credit, conservative policy analysts counter that the limited duration of time that the expansion was in place makes it hard to draw firm conclusions on its long-term impact on motivation to work. They call attention to other examples of increasing government benefits that have been shown to act as disincentives to pursuing employment.
No matter the substantive merits, there is no doubt some form of work incentive--if not an outright requirement--would help attract Republican votes and solidify the vote of Senator Joe Manchin (D-WV), who objected to continuing the expanded child tax credit mainly because it did not include a work requirement. Senator Romney’s child tax credit expansion proposal, for example, contains an explicit work requirement.
President Biden has a proven track record of not “letting the perfect be the enemy of the good,” achieving compromises that have moved our nation forward. This issue is tailor-made for him to employ these strengths and success in this area has a high policy pay-off. Permanently expanding the child tax credit will lift millions of American children out of poverty, substantially improving their quality of life and their prospects of success as adults. Its' positive impacts will be felt throughout our nation, producing a brighter future for all.
It will not be easy to achieve this goal, but it is within reach. It is time for President Biden and members of Congress in both parties to make a more robust child tax credit a priority once again. This time--let’s get the job done.