A long-running intra-GOP debate over the child tax credit is coming back to the political foreground, pitting supply-siders against more populist, family-focused lawmakers.
Lawmakers are debating an expansion of the child tax credit as part of negotiations over re-upping other tax provisions that expired this year. Democrats generally favor restoring the credit to the much more generous terms granted in 2021 by President Joe Biden’s pandemic relief legislation.
<mediadc-video-embed data-state="{"cms.site.owner":{"_ref":"00000161-3486-d333-a9e9-76c6fbf30000","_type":"00000161-3461-dd66-ab67-fd6b93390000"},"cms.content.publishDate":1670530911395,"cms.content.publishUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"cms.content.updateDate":1670530911395,"cms.content.updateUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"rawHtml":"
var _bp = _bp||[]; _bp.push({ "div": "Brid_70434714", "obj": {"id":"27789","width":"16","height":"9","video":"1202054"} }); ","_id":"00000184-f366-d1e2-abce-f77fbfc00000","_type":"2f5a8339-a89a-3738-9cd2-3ddf0c8da574"}”>Video EmbedRepublicans, though, have long been divided on larger tax credits, but recent history suggests that the party may be changing in favor of the child benefit as it looks to grow its appeal to working-class voters and distance itself from the boardrooms of Wall Street.
“Republicans are becoming the party of working-class families,” Sen. Marco Rubio (R-FL) told the Washington Examiner.
Rubio fought in 2017 to enlarge the child tax credit in the Tax Cuts and Jobs Act, which was the biggest change to U.S. tax code in decades, and faced resistance from members of his party who favored lowering tax rates as opposed to creating or expanding credits on the theory that lower rates generate economic growth.
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“It was just five years ago I had to fight against my own party to double the size of the child tax credit. Today, every one of my Republican colleagues supports doing even more,” Rubio said.
Rubio was referring to an instance last year in which Republicans unanimously voted in favor of a proposal by him and Sen. Mike Lee (R-UT) that would have boosted the child tax credit to $3,500 per child and $4,500 per child under the age of 6, versus the $2,000 value for minors of all ages under current law.
That vote, though, came during legislation on President Joe Biden’s massive pandemic relief bill, in which Democrats temporarily expanded the child tax credit to $3,000, with $3,600 for children under 6, and crucially made it fully refundable with no income requirements, meaning that the government would simply send checks to families with dependent children with no earnings from work for the full amount of the credit.
Republicans generally oppose the idea of sending checks to families with no income, arguing it is akin to welfare without work. For that reason, they opposed the Democratic expansion of the credit, and many may have voted for the Rubio-Lee alternative as a means of stopping it, and oppose reinstating it now that it has expired.
To require work, Rubio’s plan pegs the value of the benefits to tax liability. Under the plan, households with one young child would need to earn about $25,500 to get the full benefit.
Still, Republicans now may work on a compromise with Democrats to boost the credit as part of negotiations over other expired and expiring tax breaks.
Rep. Kevin Brady (R-TX), the top Republican on the House Ways and Means Committee, recently said on a press call that a redline for the GOP in expanding the child tax credit is Democrats’ desire to detach the credit from work requirements.
“The child tax credit works best as far as reducing poverty when it is also encouraging parents to reconnect to a job. That’s the fastest way out of poverty,” Brady said. “That is a very strong line for us.”
Brady, though, said he has told Ways and Means Committee Chairman Richard Neal (D-MA) that his party is still willing to discuss changes to the child tax credit.
Yet there is still resistance to making the credit more generous among Republicans and conservatives. Notably, the Wall Street Journal last month bashed the credit in an editorial and published an op-ed the same day by the former president of the Tax Foundation, a group that backs rate reductions, that declared the child tax credit “a failed experiment.”
Still, child tax credit proponents claim momentum. Chris Griswold, policy director at American Compass, a group that pushes for a conservative economic agenda focused on workers and families, told the Washington Examiner that the GOP is increasingly sensitive to the effects of economic policies on families.
“Among some conservatives, being pro-family has always had implications for economic policy,” Griswold said, noting the effort from Rubio and others in 2017.
Sen. Mitt Romney (R-UT) also has a proposal for expanding the child tax credit. His plan, supported by Sens. Richard Burr (R-NC) and Steve Daines (R-MT), envisions raising the credit amount and also making the tax credit available to poorer people, with families able to receive the full credit once their income reaches just $10,000.
The Supreme Court’s decision to overturn Roe v. Wade and rule that there is no constitutional right to abortion has also boosted Republican fans of the child tax credit. Some say the government should do more to assist families to accommodate unplanned births.
The shift in the party also goes beyond family policy. Some GOP lawmakers have taken a more populist shift on trade policy and have embraced pro-manufacturing industrial policies.
For instance, Rubio recently opposed the congressional plan, backed by the Biden administration and most Republicans, to force a labor contract on rail workers who couldn’t agree to a deal struck by union leaders and the railroads.
Rubio also voted for a proposal championed by Sen. Bernie Sanders (I-VT) that would give the rail workers seven days of paid sick leave. Fellow Sens. Mike Braun (R-IN), Ted Cruz (R-TX), Lindsey Graham (R-SC), and Josh Hawley (R-MO), and John Kennedy (R-LA) joined the effort.
Griswold said this wing of the GOP will grow stronger because it is what the base, including workers and families, wants. He also pointed to this year’s midterm elections, in which Republicans performed worse than expected, as proof that the GOP needs to do a better job spelling out an economic agenda that speaks to working families.
The terms of the debate will become clearer in the weeks ahead as Congress looks to resolve the status of several tax breaks.
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A top priority for corporations for the end of the year is the reinstatement of the full deduction for research and development expenses — an issue that has bipartisan support in Congress. If Congress doesn’t act, companies instead will have to amortize these expenses over five years, a provision included in the 2017 Tax Cuts and Jobs Act that offset some of the tax cuts.
Democrats want to use the leverage to return the child tax credit to where it stood last year.
