A cash advance to consider
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Actual bipartisan policymaking seems to be a rarity these days, but it doesn’t have to be.  Sens. Bill CassidyWilliam (Bill) Morgan CassidyState aid emerges as major hurdle to reviving COVID-19 talks From a Republican donor to Senate GOP: Remove marriage penalty or risk alienating voters Stimulus checks debate now focuses on size, eligibility MORE (R-La.) and Kyrsten Sinema (D-Ariz.) are doing their part to break political logjams by releasing a proposal to help new and adoptive parents with an up-front $5,000 tax credit when parents need it most.  Admittedly this is more of a flexible advance rather than a textbook “paid leave” plan, but Cassidy and Sinema’s proposal has a head start right out of the gate by appealing to both sides of the aisle. Congress should capitalize on this momentum by sincerely considering Cassidy and Sinema’s plan when they return from the August recess.

First, looking at any paid leave proposal, there are certain elements currently off the table for each political party. These are the ‘guardrails’ within which a bipartisan plan must be crafted.  On the right side of the highway, Republicans don’t want new employer mandates or new taxes. On the left, Democrats want a solution that is universally available, does not degrade existing state or employer-offered plans, and is meaningfully-robust. Down the median, I believe both parties want a solution that is fair and won’t break the bank (remember, new taxes are a non-starter for Republicans).

Within these constraints, Cassidy and Sinema have a solution – and it’s quite genius.  Recently increased from $1,000 to $2,000 by the Tax Cuts and Jobs Act, the crux of the Cassidy-Sinema plan is the Child Tax Credit. This $2,000 credit for each child under age 17 is available to almost all parents, and slowly phases out for higher-income taxpayers. Many families already noticed the higher Child Tax Credit when filing their 2018 returns earlier this year. Cassidy and Sinema’s proposal is beautiful in its simplicity: give new parents the option of advancing $5,000 from the credit at the time of birth or adoption, then take a $1,500 Child Tax Credit for the next 10 years – less than the full $2,000 otherwise available, but still more than the $1,000 credit under prior law.


In March of this year, I praised another paid leave plan – Sens. Joni ErnstJoni Kay ErnstWill the next coronavirus relief package leave essential workers behind? Hillicon Valley: Facebook bans ads from pro-Trump PAC | Uber reports big drop in revenue | US offers M reward for election interference info Senate passes legislation to ban TikTok on federal devices MORE (R-Iowa) and Mike LeeMichael (Mike) Shumway LeeOvernight Defense: Air Force general officially becomes first African American service chief | Senators introduce bill to block Trump armed drone sale measure | State Department's special envoy for Iran is departing the Trump administration Senators introduce bill to block Trump armed drone sale measure Trump signs major conservation bill into law MORE’s (R-Utah) Child Rearing and Development Leave Empowerment Act, or CRADLE Act.  I also expressed that during the presidential transition, our team spent considerable time looking for a clean and common-sense solution for a universal paid leave benefit, which I still consider the CRADLE Act to be.  In a nutshell, CRADLE would allow parents to take an advance from their personal social security, paid back by simply retiring a few weeks later 30 or 40 years down the road. Both CRADLE and Cassidy-Sinema fit between the aforementioned political guardrails, and they both give individuals the option of borrowing from future expected “payments” from the government.

But here is where Cassidy-Sinema has the advantage and why its receiving bipartisan support.  First, just the mention of changes to Social Security incites a knee-jerk reaction across the American political spectrum.  That needs no further explanation.  The second, less obvious reason relates to the repayment timeline and complex congressional budgeting rules.  Congressional tax writers work in 10-year budget windows.  They aren’t permitted to count revenue impacts beyond that horizon.  While it eventually pays for itself, CRADLE would require many decades to recoup the original advance, so tax writers cannot consider it revenue neutral.  Hence the repayment period of the Cassidy-Sinema plan – the advance and subsequent payback fit perfectly into the 10-year box.

The third reason Cassidy Sinema is alluring relates to one philosophy around tax credits themselves, and how much they really impact taxpayer behavior.  One school argues that many individuals simply claim any credits and deductions available to them at filing time, without having tax planned or changed their behavior during the previous year.  Such an individual simply figures those credits into their household’s bottom line.  Of course no one decides to have children for a tax credit, and there are strong arguments for helping the bottom line of all households with children, but I guarantee a one-time $5,000 check to help with early expenses would not disappear into a household’s income. This is significant assistance and it would make a real difference for any young family. 

I understand there are already at least two additional senators – one Democrat, one Republican – lined up to co-sponsor the Cassidy-Sinema plan when the legislation is introduced. I’m not surprised.  Of all the ideas out there to help with the extraordinary financial challenges of adding a young one to the home, this has the best chance of advancing.  Congress should consider Cassidy and Sinema’s proposal this September before we inevitably fall into the political vacuum of the 2020 election. The clock is ticking to get something meaningful done for America’s new families.

Michael McHugh served as chief of staff for tax reform on the Presidential Transition Team, and was previously a tax aid to a member of the Senate Finance Committee. He is a partner at Urban Swirski & Associates. The views expressed herein are purely his own, and are not reflective the administration, his firm, or anyone else.