A bipartisan pair of congressional negotiators announced a compromise deal Tuesday that would modestly expand the child tax credit for three years—potentially benefiting millions of kids in low-income families—in exchange for reviving Trump-era corporate tax cuts favored by Republican lawmakers.
The $80 billion tax framework unveiled by Senate Finance Committee Chair Ron Wyden (D-Ore.) and House Ways and Means Committee Chair Jason Smith (R-Mo.) after months of negotiations is seen as a longshot to pass given Republican control of the lower chamber and likely GOP hesitance to deliver a legislative win for President Joe Biden in an election year.
Republicans unanimously opposed the American Rescue Plan, Democratic legislation that implemented a historic expansion of the child tax credit (CTC)—briefly pushing the U.S. child poverty rate to a record low. The CTC enhancement lapsed at the end of 2021 thanks to opposition from the GOP and Sen. Joe Manchin (D-W.Va.), causing child poverty to shoot back up in 2022.
While the Wyden-Smith framework would not go nearly as far as the previous CTC expansion, analysts say it would still deliver significant benefits to children in low-income families.
“In the first year, more than 80% of the roughly 19 million children under 17 in families with low incomes who don’t now get the full credit would benefit—about 16 million children,” the Center on Budget and Policy Priorities
said Tuesday, estimating that the proposal would lift as many as 400,000 kids out of poverty in year one while alleviating poverty for 3 million more.
“These poverty-reducing effects would increase over time,” the think tank added. “When the proposal is fully in effect in 2025, it would lift some half a million or more children above the poverty line and make about 5 million more less poor.”
The new proposal would—like the current CTC and unlike the expansion approved in 2021—exclude the very poorest families by design, denying benefits to those with less than $2,500 in annual income. The Wyden-Smith proposal would also not bring back the monthly payments that eligible families received under the 2021 CTC expansion.
The maximum credit of $2,000 per child would be indexed to inflation under the new framework.
Ailen Arreaza, executive director of the advocacy group ParentsTogether Action, said in a statement that while the Wyden-Smith changes would be an improvement over the current CTC, “they do not go far enough.”
“The 2021 expansion of the child tax credit was a game-changing policy that essentially cut child poverty in half,” said Arreaza. “When Republicans refused to support its extension at the end of 2021, child poverty surged again. We have a proven tool that works almost immediately to ensure kids have enough food to eat and a roof over their heads—it’s long past time we use it.”
“I’m disgusted by those who saw the obvious need to extend those benefits as an opportunity to extract tax cuts for corporations.”
Observers lamented that the only way Wyden and Smith were able to reach a deal with even limited benefits for children in low-income families was to pair them with tax breaks for wealthy corporations.
“Child poverty is a problem. Corporations paying too much in taxes is not,” said Steve Wamhoff, federal policy director at the Institute on Taxation and Economic Policy. “Unfortunately, many members of Congress have refused to direct resources to help children in poverty unless an equal amount of resources is simultaneously directed towards corporate tax cuts.”
According to Wyden’s office, the new proposal would allow businesses “of all sizes” to “immediately deduct the cost of their U.S.-based [research and development] investments instead of over five years.”
The framework, which still must be converted into legislative text, would also provide “continued flexibility for businesses forced to borrow at higher interest rates to meet their payroll obligations and expand their operations,” a summary states.
“As arcane as this sounds,” Wamhoff said in response to the provision, “it ultimately will benefit the private equity industry and its practice of acquiring corporations and loading them up with debt, a technique that has led to the collapse of Toys R Us, Payless, and other well-established companies.”
Erica Payne, founder and president of the Patriotic Millionaires, said in a statement Tuesday that the enhanced CTC is “an undeniable good in this new deal.”
“At the same time, I’m disgusted by those who saw the obvious need to extend those benefits as an opportunity to extract tax cuts for corporations, who clearly didn’t need them as they pulled in record profits and artificially pumped up inflation. There was no need for horse trading on the CTC,” said Payne. “Congratulations to the members of Congress who have worked hard to extend and enhance the CTC; we hope to see it become law. Shame on those who exploit political moments to shower their ultrarich corporate donors with unnecessary tax breaks.”
Republished from Common Dreams under Creative Commons (CC BY-NC-ND 3.0).