How Joe Biden's Big Gamble On The Child Tax Credit Could Pay Off

The one-year extension of a new child benefit could help Democrats hold the House in 2022. Or it could blow up in their faces.

WASHINGTON ― Democrats want monthly cash benefits for parents to continue forever, but their Build Back Better bill would extend the enhanced child tax credit for just one year.

The shorter extension made budget space for other priorities, and Democrats think it sets up a political fight they can win in more ways than one ― because Republicans will struggle to say no to continuing the benefits.

“They’re going to have trouble answering this,” Sen. Sherrod Brown (D-Ohio), a key proponent of the policy, told HuffPost.

“They’re going to face a whole lot of parents who are going to say, ‘You’re going to stop that? Why are you going to stop that?’ Because it’s made such a difference in lives,” Brown said.

Democrats expanded the child tax credit as part of the American Rescue Plan earlier this year, telling the IRS to advance the credit through monthly refunds to 36 million households with children. Early data suggests the policy has already reduced child poverty by 25% in September.

Continuing the monthly payments through next year has been a key part of the Build Back Better agenda, which also includes universal pre-kindergarten, child care subsidies, expanded health insurance coverage and green energy initiatives.

Democrats rebuffed demands from Sen. Joe Manchin (D-W.Va.) to deny the child benefit to higher-earning households and ones with no work income, but they’re extending it only through 2022, instead of 2025 as originally planned. This frees up roughly $300 billion to fit other programs into the $1.75 trillion bill. They initially picked 2025 as the expiration date because that’s when the 2017 Republican tax cuts expire, setting up an easy trade ― Democrats would agree to continue the tax cuts and Republicans would support the child benefit.

Sen. Sherrod Brown (D-Ohio) questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell at a hearing on the results of the CARES Act coronavirus relief package on Sept. 28, 2021.
Sen. Sherrod Brown (D-Ohio) questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell at a hearing on the results of the CARES Act coronavirus relief package on Sept. 28, 2021.
KEVIN DIETSCH via Getty Images

Passing another major piece of legislation to extend the child benefit next year would be no small thing, and there’s a real risk that Democrats could fail to save the payments. Rep. Kevin Brady (R-Texas), the top House Republican on tax policy, said he would not be interested in keeping the tax credit in its current form.

“It drives workers out of the workforce, and that’s something we simply can’t have right now,” Brady told HuffPost, expressing the standard Republican belief that any amount of government support will make workers less desperate for jobs.

But Democrats might like to talk about the need for another child tax credit extension when they’re campaigning in next year’s midterms, when they are widely expected to lose control of the House of Representatives.

“We have to turn this election from a referendum to a choice,” said Ian Russell, a Democratic ad-maker and former political director of the Democratic Congressional Campaign Committee.

In other words, vote for Democrats, or your monthly benefit will disappear. (The program pays parents $300 per month for each kid under 6 and $250 per month for kids under 18.)

“We have an opportunity to salvage the midterms if we can turn it into a choice between Democrats who want to do ABC and Republicans who want to do XYZ,” Russell said.

Asked if Democrats would campaign on saving the credit, Brown said, “If their IQ is over about 70, they will.”

“They're going to face a whole lot of parents who are going to say, ‘You’re going to stop that? Why are you going to stop that?’”

- Sen. Sherrod Brown (D-Ohio)

Progressive Democrats have advocated cramming as many new policies into Build Back Better as possible, even if it forces cutbacks in the duration of those policies, on the assumption that people will like the new stuff so much that they’ll clamor for more.

Moderates favor doing fewer new policies for longer. “I have little confidence that a future Republican-controlled House or Senate would extend the enhanced Child Tax Credit or other Democratic priorities without significant erosion,” Rep. Suzan DelBene (D-Wash.), chair of the New Democrat Coalition, said earlier this month.

Fighting over the expiring benefits will make people pay more attention to the policy, said Lee Drutman, a political scientist and senior fellow with New America. Drutman faulted Democrats for calling the monthly cash payments a “tax credit” or “tax cut” instead of a bonus or child benefit, since taxes are confusing and people generally think of tax cuts as a Republican thing.

But if the tax credit becomes a political fight, and Democrats present themselves as the ones who want to save the credit ― even though they’re also the ones who set the deadline ― then they would have a winning issue.

“People value things they already have more than things they don’t have,” Drutman said.

Sen. John Thune (R-S.D.) said he didn’t know if Democrats were really capable of such a budget-and-election ploy. “They haven’t done much here that looks like they’re very organized or aware of what they’re doing,” Thune said.

There’s no guarantee that Democrats could bully Republicans into supporting a continuation of the child tax credit. After all, last month, Democrats barely mustered 10 Republican Senate votes for a measure to let the federal government pay its bills, even though a default could cause a financial crisis.

That may be why Democrats included an apparent backup plan in the latest Build Back Better draft. The expansion of the full credit from $2,000 to $3,600 per year per child, with advance monthly distribution, expires after one year ― but “full refundability” would be permanent under the legislation. That means that even if Congress let the advance payments and extra $1,600 lapse, low-income parents could still receive lump-sum checks worth $2,000 per child after they file their taxes.

Just keeping full refundability, all by itself, would cut child poverty 19% on an annual basis, according to an analysis by the Jain Family Institute. Full refundability plus the extra money cuts poverty 40%.

Sen. Mitt Romney (R-Utah), who proposed his own version of a child allowance last year, called the one-year extension “a gimmick that’s really not appropriate for families that wonder about their future.” But he suggested Congress won’t leave families hanging.

“There’s gonna be help for families with children, no question about that,” Romney said.

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