Congress

To relieve kid credit expansion, Democrats fix shorter renewal

Key moderates say benefit should exist tailored to neediest; others worry that could break promise not to raise taxes on eye class

Sen. Michael Bennet, D-Colo., says "difficult choices" on the child tax credit are necessary. (Tom Williams/CQ Roll Call file photo)
Sen. Michael Bennet, D-Colo., says "difficult choices" on the child tax credit are necessary. (Tom Williams/CQ Curl Call file photograph)

Posted October 22, 2021 at 7:31pm

Democrats are facing the possibility of a much shorter extension of an expanded kid tax credit they've touted than many had hoped, which could ultimately stave off cuts to other aspects of the benefit they are fiercely defending.

Every bit negotiators work to trim the Business firm'due south budget reconciliation bill from a $3.5 trillion-plus package to somewhere closer to $2 trillion, the $556 billion expansion of a tax break meant to help cover the costs of raising children and reduce child poverty is likely to cease up less ambitious than lawmakers planned.

Sen. Joe Manchin III, D-W.Va., has pressed to add work requirements and means test the benefit to target it only to those well-nigh in need. But staunch support for getting the benefit to the poorest Americans and discomfort with taking it away from higher earners because of President Joe Biden'due south pledge not to raise taxes on anyone making under $400,000 may make a one-twelvemonth expansion the compromise Democrats can go behind.

"We are going to have to brand some difficult choices as the neb gets smaller," Sen. Michael Bennet, D-Colo., said in a recent interview, of possible cuts to child care programs in the bill. "I promise in that context nosotros prioritize our children."

Democrats expanded the kid tax credit in their March coronavirus relief law and most are at present looking to preserve the broader accessibility and bigger, monthly checks they legislated for 2021. Bennet, a lead proponent in the Senate of expanding the child tax credit, described that expansion every bit "one of the all-time things the Biden assistants has done."

Democrats have pointed to studies showing the expansion cut child poverty rates. The monthly installments aim to help people living calendar month-to-month find stability and afford necessities such as nutrient, bills and school supplies. Near Democrats are unwilling to entertain Manchin's suggestion of piece of work mandates, arguing that would cut out single parents or grandparents and undercut the benefit'south impact on poverty.

It was Biden himself who start floated the pick of a i-year extension of the credit to Democrats, lawmakers accept said, with some suggesting it's a move to get a deal on the reconciliation bundle done later on weeks of negotiations and to preserve broader accessibility and value of the credit.

Nevada Rep. Steven Horsford said this week that "99.9 percent of Democrats" understand the importance of expanding the child tax credit in full to help centre-class families.

Biden is "trying to practise the all-time that he tin can. I get that," Horsford said. "But we need to once more recenter the people who are affected by the policy. And in my commune that's working families — a lot of them single moms with children who have received a lot of benefit from this tax cut already."

$400,000 hope

There appeared to exist some openness in recent weeks amidst senators to lowering the income threshold for eligibility to the credit to get a deal with Manchin and protect the remainder of the expansion. Merely Biden's $400,000 pledge is complicating that option, which would roll back a Republican-drafted policy.

The 2017 GOP revenue enhancement law boosted the tax credit to $two,000 per kid nether the historic period of 17 through 2025 and extended it to individuals making $200,000 and married couples filing jointly with $400,000 in income, phasing out at a rate of five percentage for each dollar of income above the thresholds.

Equally part of the March pandemic aid constabulary, Democrats then added an extra $1,600 per kid under 6 and $1,000 per child ages 6 through 17, which phases out for individuals making over $75,000 or joint filers earning over $150,000, amongst other changes.

Sen. Sherrod Brown of Ohio, a lead proponent of the expansion, said in recent weeks that limiting income levels as part of a bargain wouldn't modify the program's affect. Sen. Chris Coons of Delaware said on Fox News that making sure people earning $300,000 or $400,000 per year don't become the benefit could be a compromise point for Democrats.

One Business firm Democrat has fabricated getting below $400,000 a demand. Rep. Jared Golden, D-Maine, said in a letter Th to Democrats in his home state'south legislature that the child tax credit should be pared back to just benefit those most in need, criticizing the GOP expansion.

"Currently, the proposal would benefit joint filers making as much equally $400,000 per year, which is far beyond the income range of working- and middle-grade families this credit was originally intended to help," Golden wrote.

Only others said they wouldn't cross Biden'south $400,000 pledge.

"I would not support burdening middle-class families that are already struggling to get these priorities done when nosotros have billionaires in this country who don't pay any taxes," said Georgia Sen. Raphael Warnock, who won a tight special ballot in 2020 and faces reelection next year.

Golden and Warnock are considered among the about vulnerable Democrats in their corresponding chambers in the midterm campaign.

Horsford, who recently met with the president, Manchin and other lawmakers at the White House, said in a contempo interview that Biden argued if the child tax credit expansion expires at the end of the year, it would mean a tax increment on families.

Horsford, some other meridian 2022 GOP target, said 97 percent of his constituents with children qualify for the expanded credit and he wants to keep it that way.

"For Sen. Manchin or anyone else to propose that we should means examination this program, my question would exist, are you going to ways test the corporate subsidies that are given to large oil companies?" Horsford said. "Are you lot going to ways test tax breaks for very wealthy people and billionaires? I am so sick of the discrimination and the targeting of working families."

Rep. Dean Phillips said the president's pledge is a factor as his party settles on how to include the kid tax credit expansion in reconciliation.

"I think the $400,000 threshold relative to whatsoever increased burden has been pretty articulated fourth dimension and fourth dimension again, and makes it very difficult to modify that now," the Minnesota Democrat said. "I would suspect that that's going to be a pretty hard line."

Ways and Ways Chairman Richard E. Neal, D-Mass., said this week that his committee'south plan for the benefit factored in these sorts of questions.

"We thought that rather than have an statement that you lot're taking something away from me to give it to somebody else, that nosotros would motion the ceiling upwardly on what information technology might be ordinarily," Neal said.

Silver lining

Expanding the kid tax credit in total as Democrats proposed would toll near $106 billion for 2022, according to a Joint Committee on Taxation estimate, and that timeline could exist an attractive ane for the vast bulk of Democrats who've said they desire the expansion to be permanent.

That's considering it would tee up an expansion afterward the 2022 midterm elections, merely before the side by side Congress when Democrats could lose control of i or both chambers. Republicans might scrap certain aspects. For example, Democrats expanded eligibility to undocumented immigrants by dropping a requirement that children have social security numbers to qualify, and Republicans have criticized full availability to people who don't have income.

Ways and Means' ranking Republican Kevin Brady of Texas said this week that expanding certain aspects of the do good hurt the economy, slow recovery and mean fewer jobs are filled. He said making the GOP expansion permanent and preserving an "incentive to piece of work" would be amend than preserving what Democrats practice in reconciliation downward the line.

Phillips said it might be easier to extend the expansion next year, "but we don't come here to do like shooting fish in a barrel. Nosotros come hither to do what'due south correct and best." Nonetheless, he said a year is "amend than null" and that Democrats must do what'southward possible also.

Fully refundable

The goal, for most Democrats including Biden, remains that their monthly, bigger and broader checks for parents and other primary child caretakers exist permanent. In the reconciliation pecker, Democrats could still make a disquisitional slice permanent: full refundability, preserving a key feature in their effort to reduce poverty and address racial inequity.

Full refundability ways people with incomes low enough that that they owe little or nothing in income taxes can however go checks for the full corporeality they'd otherwise qualify for.

It'southward a less expensive piece of the proposal, especially every bit the full value of the child tax credit is set to wane after 2025 under current law.

But it packs a big punch. The 2021 child tax credit expansion is expected to reduce child poverty by more than 40 percent, and more than 80 percent of that driblet would come from full refundability, according to the left-leaning Center on Budget and Policy Priorities.

Bennet this week emphasized to reporters that he hopes full refundability will be permanent in Democrats' final package, and that a one-year extension of the remainder of the expansion means Democrats will have to press for it sooner.

"We've always known that we're going to have to take that fight," he said.

Lindsey McPherson contributed to this study.