Democratic senators are scrambling to unify their entire caucus behind the $3.5 trillion reconciliation bill, which contains many of the most ambitious policies that could define President Joe Biden’s legacy for generations to come. But in their bid to get moderate hold-outs like Sens. Joe Manchin and Kyrsten Sinema on board, they’re looking into shrinking or dropping one of the best policies in the package: the expanded child tax credit.
The expanded child tax credit is’t just virtuous and effective policy — it’s also savvy politics.
Biden’s bill is brimming with worthwhile progressive policies, but slashing this policy — which would make the expanded child tax credit, enacted under Biden’s Covid relief bill, permanent — would be a terrible mistake. It’s not only an effective policy that has already sharply reduced poverty, it’s more politically durable than many other policies because of its simplicity and its focus on aiding a demographic difficult to rally opposition against — children.
CNN reports that the child tax credit policy is “on the list of priorities Democrats are considering cutting” from the reconciliation bill, and that one of its biggest advocates, Sen. Cory Booker, D-N.J., says that the chances of it being included in the bill are currently "better than 50 percent.” Those aren’t dire odds, but they’re not promising either. There are also discussions about whether the policy could be shrunk or altered in some way, with the benefit going out to fewer people or only on the condition that recipients meet a work requirement.
It would be a shame if the child tax credit gets reduced or dropped, because there’s an abundance of evidence and expert analysis indicating that it’s working well in its current form — and has huge potential to transform the lives of children across the country.
The child tax credit has been around since 1997, but under the American Rescue Plan passed earlier this year, it was expanded transformatively. In the run-up to that bill, my colleague Hayes Brown broke down its new features:
The stimulus bill would expand on the Child Tax Credit in three major ways. First, it would bump up the maximum credit from $2,000 per child to $3,000. (That would be raised to $3,600 for kids under 6.) Second, it would get rid of income requirements on one end and a refund cap on the other, meaning more families would be eligible for cash.And finally, its most intriguing aspect: Instead of getting it all at the end of the year, parents who qualify could expect to get checks of about $300 per child monthly starting this summer. At the end of the year, the other half of the credit would be applied to people's taxes and would likely be refunded.
What the new policy did was take the child income tax credit from a limited tax credit to a child allowance — a stipend for families that’s common across affluent democracies but has never before been used in the U.S. in a comparable fashion. As Vox’s Dylan Matthews explained earlier this year, child allowances have been a great success in highly developed countries:
We know from the experiences of peer countries from Great Britain to Spain to Germany to Canada that child allowances can slash child poverty dramatically, and, as a consequence of reducing poverty, improve child health, increase parents’ time with their kids, and perhaps even raise incomes and extend life spans down the road for children who benefited.The key to this policy’s success is that all poor families are eligible. Before this year, many poor children were deliberately excluded from the CTC on the theory that doing so would encourage their parents to work. Biden, as part of his stimulus plan and at the urging of poverty and child welfare advocates, signed into law an expansion to all poor families for tax year 2021.
But Biden’s expansion of the child tax credit only lasts a year — the policy in the reconciliation bill is what would be needed to make it permanent.
It should be a no-brainer. After just one payment under the new system, the child poverty rate dropped from 15.8 percent in June to 11.9 percent in July, pulling 3 million children out of poverty, according to a paper from the Center on Poverty and Social Policy at Columbia University. The paper estimates that over time the policy has “the potential to reduce monthly child poverty by up to 40 percent on its own.”
Introducing work requirements, as Manchin has proposed, would kill off a lot of those benefits. Some 450 economists signed an open letter to Congress defending the expanded child tax credit as a highly effective anti-poverty program and arguing that it has a “negligible” effect on employment rates. Jacob Goldin, an assistant professor at Stanford Law School who specializes in tax policy and helped put together the letter, told CNBC that the data indicates that a work requirement “would exclude the very children who have the most to gain from receiving the benefit.”
But the expanded child tax credit is’t just virtuous and effective policy — it’s also savvy politics. The fact that most parents receive their benefits in the form of a monthly check or deposit makes the experience of the policy tangible to the public. It’s a rejection of “the submerged state” model — a term policy scholars use to refer to policies which work in hidden or subtle ways from the perspective of most citizens, like subsidized loans. The expanded child tax credit simply delivers checks to people’s hands month after month — an arrangement so straightforward that it’s been the subject of memes and viral videos on TikTok. Those regular payments are popular and more likely to be top of mind than many other new policy benefits which roll out less tangibly — something that could serve the Democrats in 2022 and 2024.
Democrats with their eyes on upcoming electoral challenges should also remember that child tax credits name children as their beneficiary, and this makes the policy less vulnerable to attack than cash assistance aimed at adults. Children cannot be targeted with racialized attack ads or accused of laziness. And directly aiding children dovetails neatly with the narrative that equality of opportunity is part of the American creed — an idea with bipartisan appeal historically.
The reconciliation bill is packed with great policies, and Sinema’s and Machin’s criticisms of the bill have been wanting, to say the least. But the expanded child tax credit is something that should clearly be left fully intact — it’s an obvious win for the party and for the country.