Senate Democrats Aim To Protect Child Tax Credit In Case Of 2022 GOP Takeover

To the dismay of a large swath of Senate Democrats, they may only manage to extend the enhanced child tax credit another year in the reconciliation bill. Many are still fighting that possibility in favor of a longer run. 

Meanwhile, quietly, they’re pushing to install a safety net in case those efforts fail. 

If the child tax credit’s proponents are only able to get a one-year extension, the enhanced credit will expire at the end of 2022. There’s a decent chance that Republicans will have regained control of at least one of the chambers of Congress by then, putting the enhanced credit at risk if that new GOP majority refuses to reauthorize it. 

So Democrats are working to make all versions of the child tax credit permanently fully refundable. The effort reaches beyond the enhanced tax credit they passed in the American Rescue Plan (which is already fully refundable) to envelope the stingier, currently only partially refundable versions that predate this year’s expansion. 

Making a credit fully refundable means that it pays down what a person owes in taxes, and then also gives them whatever money is left over. If a person makes so little money that they don’t owe any money in taxes, then, they get the full amount of the credit as a refund. 

In other words, these Democratic senators are trying to make the credit accessible to the very poorest families whose children are most likely to live in poverty. That way, even if a hypothetical Republican chamber let the enhanced credit expire, dropping the credit down to a less generous former version, families with very little or no income will still at least get the full amount of the credit.

“I have a fair amount of confidence that we’re going to make the original child tax credit’s refundability permanent,” Sen. Elizabeth Warren (D-MA) said Thursday. 

“I think we’ve won that argument on permanent refundability,” Sen. Sherrod Brown (D-OH) added to TPM. 

A Senate Democratic aide told TPM that while permanent full refundability is very much on the table, it’s “not fully locked in” yet. 

“The reason there’s so much discussion about this is that a certain senator is out on an island by himself, insisting that there be work requirements attached to the credit,” the aide said. 

Sen. Joe Manchin’s (D-WV) push for the child tax credit to be contingent on work requirements is in direct conflict with the permanent full refundability effort. Democrats pushing for full refundability want the credit’s entire amount to be accessible to people with no tax liability — families with parents out of work, or families with parents who are disabled, or families that are headed by retired grandparents. 

How It’ll Work

If Democrats manage to win Manchin over, they can pass a provision ensuring that all versions of the child tax credit are fully refundable forever. While the child tax credit’s continued existence is virtually certain — many Republicans support it in some form — the amount of money it offers to families with children is not.

The enhanced tax credit in place now offers $3,600 per child younger than six and $3,000 per child up to 17 over the course of a year. The full credit is accessible to two-parent families with up to $150,000 in yearly income, or $112,500 for a single-parent household. 

Currently, that credit is on track to expire at the end of 2021. Many Democrats wanted to make the enhanced credit permanent in this reconciliation package, but may have to settle for a year or two. 

“We need 50 Democrats,” Warren sighed when asked why the credit’s extension may be cut so much shorter than many in the caucus want.

When that credit expires, say at the end of 2022 if the credit’s proponents only manage to get a one-year extension out of current negotiations, it’ll revert back to the credit established in the 2017 Trump tax cuts. That version of the credit offered $2,000 per child over a year. When that credit expires at the end of 2025, the credit drops down to the pre-Trump tax cuts version, which offered only $1,000 per child. Both of those versions boxed the poorest families out from getting the full credit.

To many Democrats, those previous iterations of the child tax credit offer far too little financial help. But at least, if they can win the permanent full refundability fight, the poorest families won’t be blocked from the full amount like they were before.

Battle on Two Fronts 

Many of the enhanced child tax credit’s most outspoken proponents in the Senate have also not yet given up on extending the current child tax credit for longer than the year or two they seem to be stuck at right now. For some, the battle is personal. 

“I can tell you that as an immigrant with a single parent, struggling to make ends meet, if my mother could have gotten even $20 a month for each of the three kids, we would not have run out of money at the end of the month, which we regularly did,” Sen. Mazie Hirono (D-HI) told TPM. “That’s what this is for millions of families in our country.”

But they’re also making a political calculation. If they only manage to extend the credit for a year, some are banking on Republicans being hard pressed to roll back the benefits. It’s the old walnut that it’s much harder to take away a benefit people have gotten used to — and by that point, families will have become accustomed to the monthly cushion. 

“Nothing’s politically impossible when corporate interests beckon and Republicans do their bidding,” Sen. Sherrod Brown (D-OH) told TPM. “But I think so many families will say, ‘how dare you take this?’” 

“This is the biggest tax cut for working families, probably in the country’s history,” he added. “I can’t imagine that Republicans don’t pay a price if they again choose their corporate benefactors over these families that are already getting that benefit.”