Child tax credit tussle reflects debate over work incentives

To supporters of the child tax credit, there has always been an “aha moment” — the recognition that as little as a few hundred dollars a month could be life-changing.

For Colorado Sen. Michael Bennet, it was several years ago when he was working as Denver’s school superintendent. One high schooler kept falling asleep in morning classes. When Bennet asked why he was so exhausted, the student said he worked the midnight shift at McDonald’s so that his family had enough money.

For Connecticut Rep. Rosa DeLauro, it was the childhood memory of her parents being evicted and finding their furniture on the street.

Bennet and DeLauro are among the Democratic lawmakers who have pushed to make permanent an expanded child tax credit, which President Joe Biden’s coronavirus relief package transformed into a monthly payment that would be available to almost any child. But Biden could not convince even enough of his fellow Democrats that they should extend these payments through 2025, and in negotiations for his broader package of economic and social programs he appears to have settled for a oneyear extension that runs through next year.

Despite the concession, the president is still fighting for a legacy-making policy that could become the equivalent of Social Security for children. Biden dubbed the start of payments in July as “historic,” saying that the reduction to child poverty would be transformative and that he intended to make the credit permanent.

The steady evolution of the child tax credit reflects a fundamental split on how lawmakers think about human nature. Do payments from the government make people lazier or give them the resources to become more responsible? Established with bipartisan support in 1997, the credit has changed in ways that challenge many of the assumptions of political identities, as Democrats would be the ones calling on Republicans to cut taxes.

Republican critics and West Virginia Sen. Joe Manchin — the decisive Democratic vote — worry that the payments could discourage parents from working, while supporters say the money would make it easier to afford the child care and transportation needed to find jobs.

“It’s a flat-out tax cut for ordinary people,” Biden said in a Wednesday speech in Scranton. “That’s what it does. I make no apologies for it.”

The continuation of the payments of at least $300 a month per child is as much about a political transformation as an economic one.

For the purposes of the federal budget, it is a tax cut aimed squarely at the middle class as median family incomes are at $86,372. The credit’s evolution since being created in 1997 speaks to the power of using the tax code for social policy.

It allows Democrats to claim the mantle of middleclass tax cutters, while Republicans who oppose the idea could be criticized for favoring tax hikes on this key group of voters ahead of the 2022 elections. That is a sharp reversal from the Ronald Reagan-era identity of Republicans as committed to tax cuts for aiding growth.

“A lot of its initial success was that it did fit into the frame of tax relief,” said Gene Sperling, a Biden aide. “This is one place where progressives have over a period of 30 years kind of won the conceptual war.”