Se­nate duo seeks re­lief for poor in GOP tax bill

Higher-than-promised busi­ness rate seen as crutch for child tax credit

The Washington Post - - ECONOMY & BUSINESS - More at wash­ing­ton­ wonkblog BY JEFF STEIN jef­frey.stein@wash­

The Se­nate Repub­li­can tax plan would ex­clude mil­lions of the poor­est fam­i­lies from ex­panded child tax cred­its, but Sens. Marco Ru­bio (R-Fla.) and Mike Lee (R-Utah) are push­ing a plan to in­clude those fam­i­lies — and to pay for it by tak­ing some pro­posed tax breaks away from cor­po­ra­tions.

The ex­ist­ing Se­nate GOP tax bill would ex­pand the child tax credit (CTC) from the cur­rent max­i­mum of $1,000 an­nu­ally per child to $2,000 an­nu­ally per child. But that in­crease is largely limited to fam­i­lies that make enough money to pay in­come taxes. Fam­i­lies that do not make enough for in­come taxes and in­stead pay only pay­roll taxes would not qual­ify for the full in­creased credit and in­stead would get only an ad­di­tional $75 an­nu­ally per child.

On Wed­nes­day, Ru­bio and Lee pro­posed chang­ing the Se­nate bill to ex­tend more of the new ben­e­fit to such fam­i­lies, by low­er­ing the in­come level at which the ben­e­fit starts, pro­vid­ing more in cred­its to fam­i­lies that do not pay in­come taxes.

To off­set the new tax ben­e­fits for the poor, Ru­bio and Lee’s amend­ment would raise the bill’s pro­posed cor­po­rate tax rate. The cur­rent cor­po­rate tax rate is 35 per­cent, but, as writ­ten, the Se­nate bill would drop that to 20 per­cent. Ru­bio and Lee pro­posed in­stead drop­ping it to 22 per­cent.

Ru­bio and Lee also want to raise rev­enue by phas­ing out the new ben­e­fit at a lower in­come level than the bill pro­poses. Un­der cur­rent tax law, the CTC’s ben­e­fits start de­clin­ing once fam­i­lies make more than $110,000 an­nu­ally, but the bill would ex­pand el­i­gi­bil­ity to some fam­i­lies earn­ing up to $580,000 an­nu­ally. The Ru­bioLee amend­ment would phase that out at $250,000, an­other change that would help to off­set the cost of ex­pand­ing the tax cred­its for low-in­come fam­i­lies.

The pair’s plan faces an up­hill bat­tle as the Se­nate pre­pares to vote on a fi­nal bill. Ru­bio and Lee join a list of sen­a­tors ask­ing for changes. Pres­i­dent Trump has been adamant about a 20 per­cent cor­po­rate tax rate, and the pair would have to con­vince col­leagues to take tax ben­e­fits from cor­po­ra­tions and the up­per mid­dle class.

If they suc­ceed, they will ac­com­plish a goal long held by some con­ser­va­tives who have ar­gued that the ex­pan­sion of the CTC could be a key piece of a pol­icy mech­a­nism for al­le­vi­at­ing poverty. The plan has sup­port from many Democrats, too. While lib­er­als tend to ar­gue that poverty should be ad­dressed by greater spend­ing on do­mes­tic so­cial pro­grams, 46 Se­nate Democrats have also en­dorsed a plan to ex­pand the child tax credit.

Con­ser­va­tives are not hid­ing their frus­tra­tion with the cur­rent Se­nate bill.

“It needs to be equalop­por­tu­nity tax re­lief,” said April Pon­nuru, a se­nior ad­viser at the Con­ser­va­tive Re­form Net­work. “There are lots of hard­work­ing Amer­i­cans out there who de­serve a tax cut. If con­ser­va­tives want to stand for tax re­lief, how can they ig­nore the main tax that most fam­i­lies pay?”

With the help of Ivanka Trump, Lee and Ru­bio have had some suc­cess in mov­ing the GOP tax bill in their di­rec­tion. Since it was in­tro­duced in the House, the pro­posed max­i­mum ben­e­fit of the CTC has in­creased steadily to $2,000. The Se­nate bill also raises the age at which chil­dren are el­i­gi­ble for the credit to 17 from 16.

“At each stage of the process, the tax re­form bill has got­ten bet­ter at re­turn­ing more money to hard­work­ing fam­i­lies,” Lee said. “I will con­tinue to push the bill in that di­rec­tion with a par­tic­u­lar fo­cus on mak­ing the CTC re­fund­able up to pay­roll tax li­a­bil­ity.”

Like Lee, Ru­bio has been lob­by­ing Se­nate Ma­jor­ity Leader Mitch McCon­nell (R-Ky.) to make the tax credit fully re­fund­able. Given that sev­eral Repub­li­can sen­a­tors are threat­en­ing to with­hold their sup­port from the tax bill on other is­sues, how­ever, it is not clear what would drive McCon­nell to agree to the Ru­bio-Lee plan. McCon­nell does not have much money to throw around; the CTC ex­pan­sion would be ex­pen­sive; and both Lee and Ru­bio are al­ready ex­pected to vote yes on the bill. (Chye-Ching Huang, deputy direc­tor of fed­eral tax pol­icy at the non­par­ti­san Cen­ter on Bud­get and Pol­icy Pri­or­i­ties, es­ti­mates a cost of $70 bil­lion to in­cor­po­rate the Ru­bioLee plan’s pro­posed ex­pan­sion of the CTC for low-in­come Amer­i­cans.)

“There’s so many things that are still to be de­cided,” said Sen. John Bar­rasso (R-Wyo.) when asked whether Repub­li­can lead­er­ship was con­sid­er­ing the Ru­bio-Lee pro­posal. “We’ll have to see what the fi­nal pack­age looks like.” Bar­rasso is chair of the Repub­li­can Pol­icy Com­mit­tee, which helps craft the party’s pol­icy pri­or­i­ties.

Se­nate Democrats say that in the cur­rent bill, Repub­li­can lead­ers have cut off a po­ten­tial bi­par­ti­san deal on a cru­cial is­sue. “Lee and Ru­bio have been gen­uinely in­ter­ested in this and done it in good faith,” Sen. Sher­rod Brown (D-Ohio) said. “They’re not se­ri­ous about the child tax credit. The se­na­tor’s kid gets a full re­fund, but a fam­ily mak­ing $30,000 with two kids doesn’t.”

Lee and Ru­bio’s ef­forts have been met with back­lash by the Wall Street Jour­nal op-ed page, which re­cently ex­co­ri­ated Repub­li­cans try­ing to ex­pand the child tax credit. “Congress is pre­par­ing to maybe even dou­ble the Child Tax Credit. But what about cou­ples who opted for dogs in­stead of chil­dren?” wrote one colum­nist.


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