Fight for Child Tax Credit Reflects Debate Over Work Incentives | Economic news

By JOSH BOAK, Associated Press

WASHINGTON (AP) – For 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 Senator Michael Bennet, several years ago, he worked as the principal of the Denver school. A high school student kept falling asleep during morning class. When Bennet asked why he was so exhausted, the student said he worked the night shift at McDonald’s so his family had enough money.

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

Bennet and DeLauro are among Democratic lawmakers who have pushed to make permanent an expanded child tax credit, which President Joe Biden’s coronavirus relief program turned into a monthly payment that would be available to almost all children . But Biden hasn’t been able to convince his fellow Democrats yet enough that they should extend those payments until 2025, and in negotiations for his broader set of economic and social programs he appears to have settled for an extension. of a year that will continue until next year.

Despite the concession, the president is still fighting for an inheritance policy that could become the equivalent of social security for children. Biden called the start of payments in July “historic,” saying the reduction in child poverty would be transformative and that he intended to make the credit permanent.

The constant evolution of the child tax credit reflects a fundamental split in how lawmakers view human nature. Are government payments making people lazier or giving them the resources to become more responsible? Established with bipartisan support in 1997, the credit has changed in a way that challenges many assumptions of political identity, as Democrats would be the ones calling on Republicans to cut taxes.

Republican critics and West Virginia Senator Joe Manchin – the decisive Democratic vote – fear the payments will discourage parents from working, while supporters say the money would ease necessary child care and transportation costs to find a job.

“It’s a tax cut for ordinary people,” Biden said in a speech Wednesday in Scranton. ” That’s what he does. I don’t apologize for that. “

Maintaining payments of at least $ 300 per month per child is as much a political transformation as an economic transformation.

For federal budget purposes, this is a tax cut aimed squarely at the middle class, since the median family income is $ 86,372. The evolution of credit since its inception in 1997 demonstrates the power to use the tax code for social policy.

It allows Democrats to claim the mantle of middle-class tax cutters, while Republicans who oppose the idea could face criticism for pushing tax hikes on this key group of voters ahead of the elections. elections of 2022. This is a marked reversal from the identity of Republicans in the Ronald Reagan era, who pledged to cut taxes to promote growth.

“Much of its initial success was that it was part of the tax breaks,” said Gene Sperling, a Biden aide who worked on economic policy at both the Clinton and White Houses. Obama. “It’s a place where progressives have kind of won the concept war over a period of 30 years.”

The Child Tax Credit was initially bipartisan, a unique political overlap between former President Bill Clinton and former Speaker of the House Newt Gingrich.

The Republicans included it in their 1994 “Contract with America”, a list of policies that former Georgia Rep. Gingrich led to the presidency of the House. Gingrich said in an interview that former Illinois Representative Henry Hyde, a strong opponent of abortion, stressed that the GOP needs to show it cares about children after they are born, not just when they are. in the womb. The tax credit was the chosen vehicle.

Clinton proposed it separately in December 1994 in his “Middle Class Bill of Rights” speech. Convergence ultimately led to the 1997 Social Assistance overhaul that established a $ 500 tax credit for children. Future administrations have expanded credit. But until this year, the credit was not “fully refundable,” which meant low-income parents might not earn enough to receive full payment.

What Biden and Democratic lawmakers did with their coronavirus relief program was remove that limit, effectively turning the tax credit into a monthly child allowance. Their planned expansion would make this change permanent.

Gingrich and Republicans say people would quit their jobs because they could receive payments without working, depriving children of working parents who can serve as role models.

He calls it “something extremely dangerous for our culture”.

To support this argument, an article by economists at the University of Chicago assumes that expanding tax credits would cause 1.5 million parents to quit their jobs because the credits would no longer be work-related. .

“It’s a policy that has moved from one that encourages autonomy and work to one that doesn’t,” said Bruce Meyer, a professor at the University of Chicago who co-wrote the to analyse.

However, real-world economic data shows no correlation between payments and people leaving work so far. Researchers at Columbia University have found that the expanded child tax credit payments that began in July had no labor impact, and models claiming the opposite are oversimplified. Workers often need to spend money to find a job, they argue.

“You have to make an investment to be able to work,” said Elizabeth Ananat, an economist at Barnard College who co-authored the Columbia article. “You have to get your car repaired. You need to turn your phone back on. You need to buy a month’s supply of diapers to secure your place in kindergarten. “

Democratic lawmakers believe the payments reduce poverty and improve educational outcomes, making children more likely to have stable jobs as adults.

Colorado Senator Bennet supported the idea of ​​a child tax credit after discovering, as a school administrator, that more resources were needed to ensure children had the stability they needed to succeed.

“Most parents work incredibly hard, some of them have two or three jobs. And no matter what they do, they couldn’t keep the kids out of poverty, ”Bennet said.

DeLauro says the breakthrough in extending credit is due to the coronavirus showing how economically fragile many families are and Biden’s choice as presidential candidate to support politics. She believes the beneficiaries will keep their jobs because the job is part of their identity.

“People identify with their work,” she said.

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