Democrats passed a revolutionary anti-poverty measure within the COVID-19 relief package — and it was met with surprisingly little pushback.
While no Republicans voted for the package, the fights in the run-up to the bill passing were centered on the minimum wage and unemployment insurance benefit. The expanded, fully refundable child tax credit, a progressive dream for years, snuck through largely uncontested. Only when reports — like this one from Columbia University and this one from the Urban Institute — revealed the transformative effect the credit would have on child and adult poverty did it start garnering significant attention.
Now, Democrats are pushing that advantage. Could the one-year measure become permanent?
“Getting something out of the code is oftentimes harder than getting something in the code,” Rep. Richard Neal (D-MA) said at a recent press conference. “What we did is unlikely to go away.”
Rep. Rosa DeLauro (D-CT), a longtime leader on this issue, reintroduced her 2019 bill making the expanded credit permanent even before the relief package passed.
But it’s in the Senate where passing a permanent credit would likely run into its greatest barriers. Sen. Sherrod Brown’s (D-OH) office told TPM that he will introduce legislation to make permanent the child tax credit expansion in the COVID-19 relief package (along with the earned income tax credit) “in the very near future.” Sens. Michael Bennet (D-CO) and Cory Booker (D-NJ) will cosponsor it.
There is already a Senate complement to DeLauro’s bill from last session, the American Family Act, and Brown’s office said that the new legislation will be “essentially the same bill.”
That legislation calls for creating a permanent credit very similar to the one in the relief package: $3,600 per child younger than 6 and $3,000 per child up to 17 over the course of a year.
DeLauro’s team hopes the legislation can be incorporated into the upcoming infrastructure package, her office told TPM, which some Democrats are already pushing to be passed through budget reconciliation in the Senate.
Reimagining The Credit
The child tax credit has existed in some form for more than two decades. But the American Rescue Plan — and the legislation to make the credit permanent now — reimagines it completely. The measure in the American Rescue Plan that Democrats are seeking to make permanent in these new bills makes the credit fully refundable, bigger and distributed more frequently than once a year.
Making the credit fully refundable means that low-income families get the full credit even if they don’t owe any income taxes. The Center on Budget and Policy Priorities estimates that making it fully, instead of partially, refundable will envelope an additional 27 million children whose families currently miss out on the full credit because they don’t make enough money.
The expanded credit further breaks from its previous iterations because it will be dispersed more frequently than once a year, providing families a steady cash flow.
These changes in the American Rescue Plan Democrats are seeking to enshrine in law permanently expand a tax credit into something that looks a lot like a guaranteed income for families with children, a feature in many other “rich” countries.
… But Can A Permanent Version Pass?
The politics around the child tax credit aren’t cut and dry.
Democrats are the ones leading the charge on making the credit permanent now, and who both rallied around previous bills to do the same and included a one-year expansion in the House’s HEROES Act (which died in the Senate last year).
But Sen. Mitt Romney (R-UT) joined with Sen. Michael Bennet (D-CO) on a compromise credit in 2019, and has a current proposal to enlarge the credit, though funded through other cuts to the social safety net.
That’s prompted some speculation that there might be room for Democrats to attract bipartisan support — essential if the Democrats hope to pass a permanent expansion without going through budget reconciliation.
The credit has also been expanded through Republican administrations, particularly during former President George W. Bush tax cuts of 2001, and at Republicans’ behest, like Sen. Marco Rubio’s (R-FL) increasing the size of the credit for many in the 2017 Tax Cuts and Jobs Act.
“We’ve never had a point where the credit was made less generous,” Elaine Maag, principal research associate at the Tax Policy Center, told TPM.
This time, Brown’s office told TPM, it intends to craft a bill to make the expanded credit permanent in a way that will be able to go through budget reconciliation, avoiding the filibuster and limiting the amount of Republican cooperation needed.
But such a strategy might require offsets, an issue that also arose when Democrats tried to pass a minimum wage hike through reconciliation earlier this year. The Joint Committee on Taxation found that the expanded credit in the COVID-19 relief package will cost $110 billion for the year it runs. Maag suggested a whole host of possible revenue sources to balance out that spending: a wealth tax, increased taxes on capital gains — “if they’re really optimistic, maybe they can try to squeeze in a carbon tax.”
“It’s not a cheap policy and they can’t do just a tiny bit of tinkering,” she said. “This will need a substantial revenue source.”
The need for offsets in reconciliation is more a norm than a rule though, and some Democrats bristle at the notion of needing to pay for the anti-poverty measure while other legislation has sailed through before.
“No one blinked an eye when we passed tax cuts for the rich,” a DeLauro staffer told TPM, referring to the 2017 Trump tax cuts. “No one needed offsets for that.”
In addition to the expense, Maag said she expects resurrected fights on who deserves the assistance, pinned to the notion that only children of working parents should get help.
It may not be easy — “it’s rough when the tax system becomes the benefits provider,” Maag said wryly — but there is a path to passing a permanent, fully refundable, child tax credit. And that, on its own, is revolutionary.