Opinion: Don't borrow from kids' future for tax credit relief now
An estimated 14.4% children in America lived in poverty before the pandemic, compared to only 9.4% of adults and 8.9% of seniors. Encouragingly, policymakers are finally taking this issue seriously and proposing real solutions to curtail child poverty, including a huge expansion of the child tax credit.
Unfortunately, the plan on the table ignores how this expansion would be paid for. That’s a huge mistake. We shouldn’t have to borrow from our kids’ future in order to support them today.
For context, the tax code currently provides many families with an annual $2,000 tax credit per child. But because the credit is only partially refundable — meaning a taxpayer can receive a rebate of up to $1,400 per child if their tax bill is zeroed out — and phases in based on income, not everyone is eligible for the full amount.
Out of 48 million filers expected to claim the credit in 2020, 10.6 million made less than $30,000. Households under $30,000 in income are expected to receive 14% of the $117 million total child tax credit dollars in 2020, while households making at least $100,000 will receive 40%. Numerous proposals have been introduced over the years to reform this credit and make it more universal.
A temporary one-year version of this policy is included in the $1.9 trillion COVID-19 relief bill called for by President Joe Biden currently making its way through Congress. It would increase the credit to $3,000 per school-age child and $3,600 per child under 6, and make the credit fully refundable and available to low-income families.
Providing more aid to families and children is a laudable goal. But at a cost of more than $100 billion per year, we shouldn’t force our children to pay for it.
The proposal is being shoehorned into legislation alongside other one-time measures meant to fight the pandemic and economic downturn, where it clearly doesn’t belong.
Expanding the child tax credit isn’t COVID-19 relief, especially when you consider the bill is already sending $1,400 per child (along with the $600 earlier this year) to families in the form of recovery rebates.
Temporary economic stimulus may have its place in policy debates, but potentially transformational changes to the child tax credit deserve a more sustainable design.
If we are going to make this a permanent policy, families deserve to know it will be here to stay. They shouldn’t have to count on Congress to extend this tax credit year after year. Nor should we let them add another $1.1 trillion to the national debt over a decade by doing so.
Luckily there is an alternative: Just pay for the policy. During the presidential campaign, Biden proposed $5.4 trillion in tax increases and cost savings that could help pay for the credit expansion, including higher taxes on wealthier households and corporations. And there are plenty of other offsets available. To prevent disrupting the economic recovery, these offsets could be phased in gradually.
Lawmakers could also build off Sen. Mitt Romney’s recent proposal, which would consolidate a number of other support programs for children and working families, and repeal tax breaks that benefit higher-income households, to finance the expansion of the credit.
The federal budget is certainly in need of improvements to better support future generations. Improving the current child tax credit would help in that regard. (Setting the national goal to make our schools the best in the world wouldn’t hurt either.)
But we can’t keep passing trillion-dollar tax cuts under every new presidency. It’s time to start prioritizing what’s in our budget and paying for the things we value most.
Maya MacGuineas is the president of the Committee for a Responsible Federal Budget in Washington, D.C.