Modest Child Tax Credit Expansion Languishes in the U.S. Senate Awaiting a Vote

Despite all the distractions of former President Trump’s legal challenges, a terrible war in Gaza, delayed funding for Ukraine and Israel due to controversy around the U.S. southern border but at the same time defeat of a law intended to address the very problems on the border that many in Congress have deplored, and a protracted attempt by the U.S. House of Representatives to impeach Secretary of Homeland Security Alejandro Mayorkas and maybe eventually President Joe Biden himself, you may recall that on January 31st, the House of Representatives did address a significant domestic policy issue: the need to ameliorate child poverty. The House passed a significant funding increase for the Child Tax Credit and sent the bill on to the U.S. Senate. If Congress passes this bill, it would be an initial step in what must be a long term effort to restore the Child Tax Credit expansion Congress passed in 2021 during COVID but allowed to expire in 2022.

The new bill, a complex compromise pairing business tax breaks with help for 19 million children, has not yet come to the floor for a vote in the Senate, whose members just left town on Friday for a two week winter vacation. Here is ABC News commenting on Congressional dysfunction: “This Congress remains one of the least productive sessions in U.S history, sending just 39 bills for the president’s signature. With divided power on Capitol Hill, legislation typically passes one chamber, but dies in the other.  The House overwhelmingly passed the Tax Relief for American Families and Workers Act, which temporarily expands the child tax credit while renewing some corporate tax cuts. But the Senate has not yet considered it, and it’s unclear if it enjoys the same level of bipartisan support in the upper chamber.”

The new bill expanding the Child Tax Credit is inferior to what was incorporated in the 2021, COVID relief, American Rescue Plan, which helped America’s poorest families by making the Child Tax Credit fully refundable to families without income or with such meager income that they don’t pay enough federal income taxes to cover the amount of the full Child Tax Credit. Tragically when Congress let the improved, fully refundable Child Tax Credit lapse in 2022, U.S. child poverty increased by 41 percent.  Keep in mind that middle and upper income families qualify to receive the full Child Tax Credit for each of their children under the age of 17.

Even though the new bill passed by the House at the end of January does not make the Child Tax Credit fully refundable, it would help our nation’s poorest children. The Center on Budget and Policy Priorities (CBPP) explains: “The expansion would be in effect for three years. While modest in size, the proposal would have a significant impact. In the first year, more than 80 percent 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. This includes nearly 3 million children under age 3… In the first year, the proposal would lift as many as 400,000 children above the poverty line and make an additional 3 million children less poor as their incomes rise closer to the poverty line. These poverty-reducing effects would increase over time. 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…This would mark the beginning of a much-needed reversal of the sharp rise in child poverty that occurred in 2022, following the expiration of the Rescue Plan expansion of the Child Tax Credit and other COVID relief measures.” The bill would help “more than 1 in 3 Black children, more than 1 in 3 Latino children, 3 in 10 American Indian and Alaska Native children… and roughly 1 in 7 white children and Asian children….”  In a more recent analysis, CBPP documents that “an estimated 27 percent of children under 17 living in rural areas would benefit in the first year, compared with a still sizeable 22 percent in metro areas.”

The Center on Budget and Policy Priorities outlines three ways in which the new bill would reduce child poverty: by “moving to a ‘per-child’ phase-in to ensure low-income families receive the same credit for each of their children, as higher-income families already do; increasing and then effectively ending in tax year 2025 the lower maximum credit amount (known as the ‘refundability cap’) that only limits the credit for families with low incomes; and allowing families to use their earnings from either the current year or the year before when calculating the Child Tax Credit so if their incomes drop—because they lost a job, faced health or caregiving needs, or welcomed a new child—their Child Tax Credit doesn’t fall as well….”

In an important column in Sunday’s Washington Post, E.J. Dionne blames Senator Mike Crapo (R-Idaho) and others in his party for the fact that the bill has not yet made it to the floor of the Senate for a vote. Senator Crapo is the ranking member of the Senate Finance Committee. Dionne explains why Senator Crapo is trying to hold up the bill: “Under the bill, if a family’s income drops, it could use its previous year’s earnings to qualify for a larger tax credit. Crapo and other detractors see this as a disincentive to work. These critics claim that low-income people would stop working and cut their incomes just to take advantage of this modest benefit.” Dionne quotes a conservative activist who finds this argument ridiculous: “No one is going to zig zag in and out of the workforce every year just to get a partially refundable child tax credit… That’s silly.”

It is troubling that many conservatives allege that reforming the the Child Tax Credit would be a disincentive for impoverished parents to get a job. Many parents denied this kind of help are already working, although they are paid very little.  Sometimes they do not control their hours which are scheduled irregularly by their employers; sometimes they are trying to patch together more than one low paying job but still making too little to qualify for the full Child Tax Credit as it is now designed. Dionne cites the example of “a single mother with two children who earns $13,000 annually working part time as a home health aid (who) would see her credit rise by $1,575 in the first year of the new bill’s operation.”  The Center on Budget and Policy Priorities asks readers to “consider a parent who has a toddler and a second grader and earns $15,000 working as a food server. In the first year, the family’s Child Tax Credit would increase by $1,725, from $1,875 to $3,600.”

Dionne makes a strong case for the U.S. Senate’s taking up this bill immediately upon its return from winter vacation: “It’s hard to think of a value more traditional and basic than the responsibility of parents to nurture their children. So unless you think government shouldn’t help anybody ever, the most conservative use of taxpayer money would be to strengthen the ability of families to carry out this duty.”