Democrats are rallying behind a child tax credit expansion, sensing momentum around one of the few tax issues that could garner bipartisan support in the coming months.
The proposal was included in the House-passed HEROES Act in May and later highlighted by Democratic presidential nominee Joe BidenJoe BidenSunday shows preview: Democrats' struggle for voting rights bill comes to a head David Weil: Wrong man, wrong place, wrong time Biden's voting rights gamble prompts second-guessing MORE in September. More recently, a slimmed-down version of the proposal was part of the revised HEROES Act that House Democrats passed last week.
While Republicans have not been supportive of those larger bills, they have expanded the child tax credit in the past, making Democrats hopeful that there could be congressional action either later this year or in early 2021.
“Not only does it help families now, I think it’s good long-term policy,” Rep. Suzan DelBeneSuzan Kay DelBeneDemocrats look to scale back Biden bill to get it passed Democrats face tough choices on Biden plan after Manchin setback The Hill's Morning Report - Presented by National Industries for the Blind - Manchin says no; White House fires back MORE (D-Wash.), a member of the House Ways and Means Committee, told The Hill.
Democrats have long been interested in expanding the child tax credit in an effort to provide more assistance to low- and middle-income families and have renewed these efforts as part of their push for another coronavirus relief package.
The initial $3.4 trillion HEROES Act would expand the credit in several ways for 2020. It would make the credit fully refundable so that the lowest-income households and households that lost jobs could receive the full amount of the credit, and it would increase the credit amount from $2,000 per child to $3,000 per child, or $3,600 for children under the age of 6. Seventeen-year-olds, who currently don’t qualify for the credit, would be eligible.
The initial proposal also would direct the Treasury Department to endeavor to provide the expanded credit as advance payments on a monthly basis, so that people would not have to wait until they file their 2020 tax returns next year to get relief.
The updated version of the HEROES Act, which was scaled back to have a smaller overall price tag of about $2.2 trillion, includes provisions on full refundability and advanced payments but does not increase the credit amount.
The prospects for a deal on a COVID-19 relief package between Democrats and the Trump administration are shaky and looking less likely after President TrumpDonald TrumpClyburn says he's worried about losing House, 'losing this democracy' Sinema reignites 2024 primary chatter amid filibuster fight Why not a Manchin-DeSantis ticket for 2024? MORE on Tuesday tweeted that he’s directed his representatives to stop negotiating until after the elections.
After Trump’s tweet, Speaker Nancy PelosiNancy PelosiClyburn says he's worried about losing House, 'losing this democracy' King family to march for voting rights in Arizona before MLK Day GOP's McCarthy has little incentive to work with Jan. 6 panel MORE (D-Calif.) wrote in a letter to colleagues that the president “has prioritized protecting the tax cut for the wealthiest from the CARES Act instead of meeting the needs of the poorest children in America — rejecting the Earned Income Tax Credit, Child Tax Credit, and the needs of school children learning safely in-person, hybrid, or virtual.”
The White House presented a proposal to Pelosi last week with a cost of about $1.6 trillion that did not include an expansion of the child tax credit. Pelosi highlighted this difference in a letter to House Democrats on Friday. She also noted that the administration has not joined Democrats in proposing an expansion of the earned income tax credit, which benefits low- and middle-income workers.
“Essential to the well-being of America’s working families is the Child Tax Credit and Earned Income Tax Credit,” Pelosi wrote. “In the original Heroes Act, we allocated to $149 billion, which we have cut to $57 billion in the updated bill. The Republican proposal had zero.”
If Democrats are unable to reach an agreement with the Trump administration on a new stimulus package, they may be able to enact an expansion of the child tax credit next year if Biden wins the presidential election.
The former vice president said he supports the HEROES Act, and his campaign put out a document last month — prior to the release of the smaller-scale version of the package — that touted the version of the child tax credit expansion in the initial version of the Democratic proposal.
“Biden will in fact give working families meaningful tax relief,” campaign policy director Stef Feldman said on a call with reporters in September.
Congressional Democrats say they are encouraged by Biden’s public display of support.
“I’m excited that they are supportive, and we need to work together to get the policy in place so we can continue to help families,” DelBene said.
An aide to Democrats on the House Ways and Means Committee said Rep. Richard NealRichard Edmund NealJudge dismisses Trump suit to block Congress from getting tax returns Child tax credit expiration adds pressure for Democrats It's time for Congress to close the carried interest loophole MORE (D-Mass.), the panel’s chairman, would continue to push for expanding the credit under a Biden administration.
In addition to providing a temporary expansion of the child tax credit during the pandemic, many congressional Democrats want to permanently enhance it. Legislation to do so has overwhelming support from Democrats in both the House and Senate.
The coronavirus recession isn’t the first time that Democrats have pursued enhancements to the credit during an economic downturn. A stimulus bill that former President Obama signed in 2009 amid the Great Recession included a provision that allowed more low-income families to be able to use the it. This change was initially temporary but was later extended, and it was made permanent in 2015.
An expansion of the child tax credit would likely be more popular among Republicans than other Democratic tax proposals. Trump’s 2017 tax-cut law made changes to the credit that included increasing the credit amount from $1,000 to $2,000 and increasing the amount that families can get as a refund from $1,000 to $1,400. Last year, Sen. Mitt RomneyWillard (Mitt) Mitt RomneySunday shows preview: Democrats' struggle for voting rights bill comes to a head Kyrsten Sinema's courage, Washington hypocrisy, and the politics of rage Romney says it 'would be nuts' for the RNC to block candidates from commission debates MORE (R-Utah) joined Sen. Michael BennetMichael Farrand BennetBiden addresses Coloradans after wildfires: 'Incredible courage and resolve' Equilibrium/Sustainability — Mars may start 'terraforming itself' Boulder County picks up pieces after unprecedented wind and firestorm MORE (D-Colo.) in putting forward a proposal to create a larger credit for children under 6 and to make part of the credit fully refundable so that households under the phase-out levels can receive some credit amount regardless of their income.
Kris Cox, a senior tax policy analyst at the left-leaning Center on Budget and Policy Priorities, said that the portion of Democrats’ proposals to make the credit fully refundable is particularly important. Under current law, families have to earn at least $2,500 to qualify for any of the refundable part of the credit, and the credit amount phases in with income. Cox said that about 27 million children live in households that don’t qualify for the full credit because their incomes are too low.
“Making the child tax credit fully refundable would provide the hardest hit families with relief at a time when it really matters,” Cox said. She added that it could also help to stimulate the economy, because low-income households are most likely to spend additional dollars that they receive rather than save them.
Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget, a budget watchdog, said that making the child tax credit more refundable could be a good stimulus but also said that including this in coronavirus relief legislation feels like “mission creep.”
“The goal of COVID relief should be to address the current needs of the economy and the country, not to get a foot in the door for policies you would have supported anyway,” Goldwein said. He added that if policymakers want to expand the credit, they could pay for doing so through offsets that could be phased in over time.