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A closer look at what Marco Rubio got added to the Republican tax bill at the last minute

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Sen. Marco Rubio, R-Fla., had asked for three big changes to the $2,000 credit included in the Senate-passed bill, which was doubled versus current law. But he only got a little of what he asked for. (AP Photo/Evan Vucci)

Sen. Marco Rubio got some of, but not all, of the boost he wanted to the child tax credit by holding out support for the final GOP tax bill until it was finalized.

It’s worth a closer look at exactly what the Florida Republican won by threatening a "no" vote on the joint House-Senate tax bill in the lead-up to its unveiling Friday.

Rubio had asked for three big changes to the $2,000 credit included in the Senate-passed bill, which was doubled versus current law.

  1. He wanted the full $2,000 of the credit refundable. Refundable means that, if the credit exceeded the taxpayers’ tax liability, the government would simply send them money. Many conservatives are skeptical of refundable credits on the grounds that they look like government benefits, but Rubio wanted the refundability applicable against payroll taxes, which even low-earning workers do pay. In the Senate bill, the credit would only have been refundable up to $1,100 in 2018, and Rubio wanted that raised to $2,000.
  2. He sought to have the refundable credit kick in with the first dollar of earnings. Under the Senate bill, the refundability of the credit would have been limited to 15 percent of earnings over $2,500. Rubio would have made the refundable credit equivalent to 15.3 cents a dollar on all of earnings, starting at zero. That would have provided a significant boost to very low-income earners.
  3. He would have indexed the credit for inflation, so that it doesn’t lose its value over time.

In the end, Rubio went 0.5 for three. He got the refundable part of the credit raised from $1,100 to $1,400, and that’s it.
How significant is that change? Thanks to it, roughly 2 million more children in moderate-income families will receive the full value of the $1,000 increase in the child tax credit, according to the Center on Budget and Policy Priorities, a left-of-center think tank. Millions more would get a partial benefit short of the total increase in the credit.

But because the credit would not be refundable starting at zero income, around 10 million children in very-low income families wouldn’t get a benefit, per the think tank's analysis. Those families don't have enough earnings to get over the $2,500 hurdle.

The story doesn't end there, though. On the other side of the ledger, the taxwriters freed up the money for Rubio's larger refundable credit by scaling back the credit in other ways. Rather than being available to children up to age 18, as it was in the Senate bill, it could only be claimed for those up to 17. And the credit would begin to phase out for couples earning $400,000, rather than $500,000 as in the Senate bill (which was nearly five times higher than current law).

The bottom line is that the changes Rubio won actually shrunk the credit, in dollar terms, by $6.2 billion over 10 years, according to Congress’ Joint Committee on Taxation.

Furthermore, the final bill cracked down on use of the credit by requiring taxpayers to present a Social Security number for each child claimed, something not required under current law. That requirement would have the effect of cutting off many people from the credits, including many “Dreamers” – children brought to the U.S. by illegal immigrants.

That restriction further lowered that value of the credit by $6 billion over 10 years.

Taking it all together, Rubio’s changes slightly shrunk the total value of the child tax credit over the next decade, and redirected some of its benefits away from illegal immigrants, and all families with 18-year-olds, and families in the $400,000 to $500,000 income range. Those benefits accrued to moderate-income families.

Yet, the changes made Friday are likely not to be the last word on the topic of child tax credits. For his part, Rubio described the change as a “a solid step toward broader reforms which are both Pro-Growth and Pro-Worker,” and promised “more to do in the months and years to come.”

Those are changes that could have support from the other side of the aisle.

Recent legislative history here helps: When congressional Republicans and former President Barack Obama teamed up in late 2015 to make permanent a bunch of expiring business tax breaks, the legislative package included an expansion of the refundability of the child tax credit – a key ask of Democrats for going along with the pro-business provisions. Other Democrats also wanted the legislation to index the credit to inflation.

The final GOP tax bill includes a host of expiring business and individual tax breaks. In the past, the price of Democratic support for re-upping important temporary taxes has been similar enhancements for low-wage tax credits. That will be a key dynamic to watch in the years ahead.