The expiration of the child tax credit expansion late last year sent an estimated 3.7 million children back into poverty and undermined the financial security of millions more. With the rising cost of living squeezing family budgets, the expiration of the credit could not have been more poorly timed.
Research has shown that the program, which provided families with monthly payments worth $250 to $300 per child, led to dramatic declines in food insecurity and helped parents offset the costs of school closures.
Democrats tried to extend the program on their own, but the effort fell to an intraparty squabble. There is the possibility of a new approach — and one that has a surprisingly strong chance of working. Democrats can work with Republicans on a bipartisan child tax credit expansion as the most viable path forward. A similar approach worked for infrastructure, and there are plenty of reasons to believe it can work again.
A key obstacle to the Democrats’ attempt to expand the child tax credit alone was Senator Joe Manchin’s insistence that the monthly child benefit include a work requirement. Democrats chose not to compromise on that condition; they also ignored the option of expanding the program on a bipartisan basis. If persuading Mr. Manchin was hard, the thinking was, then convincing 10 or more Republicans to cross the aisle would surely be impossible.
But that assumption may be wrong. Consider that in 2021 Senator Mitt Romney released a child benefit proposal of his own, the Family Security Act. That proposal was more generous than the child credit from President Biden and earned praise from across the political spectrum, including an array of conservative policy analysts and thought leaders. The proposal also inspired conservative interest in child benefits more generally, from Senator Josh Hawley’s Parent Tax Credit to the proposal for a Family Income Supplemental Credit from American Compass, a conservative think tank.
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When it looked likely that the child tax credit would expire at the end of December, several Republican senators expressed interest in working with Democrats on a stopgap measure. Senator Susan Collins, for instance, said that she was “open to proposals that would support working families and reduce childhood poverty” and that she looked forward “to working with colleagues of both parties on bipartisan solutions.”
Bipartisan appetite for expanding the child tax credit is nothing new. During negotiations over the American Rescue Plan in 2021, Senate Republicans voted unanimously for a proposal from Senators Marco Rubio and Mike Lee to increase the child tax credit to $3,500 for children 18 and younger and to $4,500 for children younger than 6. The credit would be available only to the lowest income families to the extent that it offset their payroll taxes, creating a de facto work requirement. Despite sacrificing the simplicity and universality of a true child allowance, an expansion along those lines would produce significant benefits for children in poverty and provide greater tax relief in total dollar terms for working-class and middle-class families than the Biden credit. It also suggests that cost is not the main barrier to reaching a compromise.
Maintaining the child tax credit’s connection to work or earnings nevertheless remains a sticking point for most Republicans. To that end, designing the credit to rapidly phase in eligibility with earnings would serve to strengthen the child tax credit’s work incentive, helping to expand the labor supply and the credit’s bipartisan appeal simultaneously.
The focus could then be put on preserving an unconditional benefit for young children, say below age 6. Parents of young children have higher average poverty rates and greater upfront expenses, including child care.
An unconditional child benefit for infants is unlikely to face serious Republican opposition. Fears about work disincentives are simply much less relevant for parents of newborns. Senator Bill Cassidy has even proposed letting new parents pull forward $5,000 in child credits to help offset the huge expenses associated with pregnancy, which often include unpaid time off from work. And with the Supreme Court preparing to rule on a major abortion case, Republican interest in providing flexible resources to new parents only stands to grow.
Democrats may be unwilling to move off their ideal proposal, but some historical perspective is warranted. In 2016, Hillary Clinton’s presidential campaign proposed expanding the child tax credit for young children to $2,000 with a 45 percent phase-in. Reports hailed the proposal as a serious effort to tackle deep poverty, citing an analysis from the liberal Center on Budget and Policy Priorities. The only thing preventing Democrats from advancing an identical proposal on a bipartisan basis today is their expectations for more.
An ideal compromise would therefore combine a larger credit — and strong work incentive — for parents of school-aged children with a robust monthly benefit for those caring for infants and toddlers. A deal along these lines would still have a large impact on child poverty, only now with the all-important benefit of bipartisan political support.
Enacting an unconditional benefit for all children remains a worthy aspiration. But given that the most likely outcome is now no expansion at all, failure to consider creative compromises makes the perfect the enemy of the good. The popularity of the bipartisan infrastructure package provides a template for how to move forward.
Helping American families raise the next generation should not be a partisan issue. But while Democrats are in the legislative driver’s seat, it’s up to them to make it a bipartisan one.
Samuel Hammond (@hamandcheese) is the director of poverty and welfare policy at the Niskanen Center.
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