How Democrats Could Change The Child Tax Credit

It looks like Sen. Joe Manchin could get his way on excluding people with higher incomes.

Democrats could make changes to the monthly payments to parents as part of the major policy bill they’re hoping to pass this fall.

Since July, most parents have been receiving $300 per month for each child younger than 6 and $250 for kids ages 6-17. The monthly payments are smaller for households earning more than $150,000 annually.

Sen. Joe Manchin (D-W.Va.) has said he thinks the policy is too generous. He says Democrats should exclude wealthier households, because they don’t need the money, and also exclude the poorest households, to punish them for not earning more money themselves.

“Don’t you think, if we’re going to help the children, that the people should make some effort?” Manchin said earlier this month.

Since Democrats control just 50 seats in the Senate, they need all their senators to support the bill ― meaning Manchin can force them to change things he doesn’t like or else he can tank the whole thing by withholding his vote.

Sen. Joe Manchin could get Democrats to add an absolute cutoff that would prevent higher-income families from receiving a partial child tax credit.
Sen. Joe Manchin could get Democrats to add an absolute cutoff that would prevent higher-income families from receiving a partial child tax credit.
Kevin Dietsch via Getty Images

Democrats consider the child tax credit one of their greatest policy achievements, and continuing the monthly payments past December, when they’re scheduled to expire, is a top priority.

But House Ways and Means Committee Chair Richard Neal (D-Mass.), a key architect of the party’s spending plans, said it was “hard to say” whether Democrats would be willing to change the child tax credit to make it stricter.

“We’ve just been talking about a lot of these issues so that we can get to 218,” Neal told HuffPost last week, referring to the number of votes needed to approve legislation in the House.

As it stands, households can get the monthly payments even if they have no earned income. Manchin supports imposing a “work requirement” ― Washington jargon for cutting off the unemployed and implying they are lazy.

Democrats’ favorite thing about the expanded child tax credit is that it slashes child poverty by providing monthly income to the poorest parents. Excluding the poorest households would spoil the tax credit’s antipoverty effect, and it’s hard to imagine Democrats going in that direction.

But Manchin has also complained about higher-income households receiving the benefit, and Democrats would probably be more willing to exclude wealthy families than poor ones.

Already, monthly payments are smaller for married households with incomes above $150,000. The maximum annual value of the credit for children under 6 is $3,600. That sum is $50 smaller for each $1,000 a household earns above the $150,000 threshold. Since there is no absolute cutoff, families with lots of young children can receive partial payments even if their incomes exceed $400,000.

“I have got people that are making combined 200 and 300 and more, up to 400, saying they’re getting checks,” Manchin complained.

There’s a good reason to think Manchin could get Democrats to add an absolute cutoff that would prevent higher-income families from receiving a partial benefit: He’s done it before.

When they were drafting the American Rescue Plan earlier this year, Democrats wanted to send $1,400 checks to most American households, using the same “phaseout rate” that is currently in place for the child tax credit, meaning payments would gradually diminish for wealthier households but there was no ceiling on who could receive them. Manchin insisted on an absolute cutoff for joint tax filers with incomes above $160,000, and that’s how the bill ended up.

A Democratic aide said Manchin has privately pushed for a tighter limit on child tax credit payments, in addition to his public comments. Spokespeople for Manchin did not respond to a request for comment.

Party leaders have proposed expanding the credit to children without Social Security numbers, so it would benefit households with mixed immigration status, and also more flexible rules for determining a parent’s eligibility based on their child custody situation ― possible concessions they could try to get from Manchin.

Democrats aren’t sending child tax credit payments to wealthy households by accident. They wanted the monthly payments to have as broad a constituency as possible so that people think of the program more like a Social Security benefit for the middle class than a welfare benefit for the poor.

White House press secretary Jen Psaki on Monday seemed to allude to the American Rescue Plan’s lower cutoff for stimulus checks when asked about Biden compromising on parts of the next bill.

“Look at the president’s past proposals and what he’s supported in the past,” Psaki said. “There has been prioritization in the past in some areas for … income caps so we could expand the scope of who could get it without it being to the highest income.”