Democrats Look for Ways to Revive Refundable Child Tax Credit

The Fiscal Times· GraphicStock

With negotiations stalled on the $1.7 trillion Build Back Better Act, Democrats are attempting to salvage one of the bill’s key provisions, a renewal of the temporary enhanced child tax credit that was part of the American Rescue Plan Act signed into law last March. The program provided direct payments to roughly 35 million American families with children, including households with no reported income, and was credited with sharply reducing child poverty in the U.S. over the last few months.

Senate Majority Leader Chuck Schumer (D-NY) said Tuesday that he would continue to try to pass the Build Back Better Act, which includes a one-year extension of the enhanced tax credit, at a cost of $185 billion. "I intend to hold a vote in the Senate on BBB,'' Schumer said. "And we'll keep voting until we get a bill passed." But continued opposition to the bill from Democratic Sen. Joe Manchin (WV) and virtually all Republicans has raised serious doubts about whether the legislation can advance in anything like its current form.

Manchin has criticized the refundable child tax credit on multiple grounds, including that it is too generous and lacks work requirements; he has also reportedly complained that the payments could be used by some families to buy drugs. In addition, Manchin has characterized the proposed short-term renewal of the tax credit as a “gimmick,” and called for new social programs to be funded on a long-term basis to reflect their true cost. The 10-year cost of the enhanced child tax credit is estimated to be $1.6 trillion – or nearly all of the spending Democrats are calling for in the Build Back Better plan.

One option reportedly being discussed by Democratic lawmakers is to write a stand-alone bill that extends the tax credit. However, that approach would require Republican support in the Senate, which is highly unlikely, leaving the child tax credit extension very much up in the air, along with the rest of the remaining elements of President Joe Biden’s domestic agenda.

Less popular than expected: Although social welfare experts hailed the child tax credit payments for their potential to reduce poverty, and initial results appear to be positive, there has been little pressure from voters to extend them.

“I have been kind of surprised that this has not been as popular as many of us expected that it would be,” Brad Wilcox, a conservative sociologist at the University of Virginia, told The New York Times’s Ian Prasad Philbrick Wednesday.

According to Philbrick, one possible reason for the lack of public enthusiasm for the more generous program is that the public may be losing confidence in government in general and pandemic relief efforts in particular as the Covid-19 crisis grinds on. And this lack of faith in the efficacy of government action could dovetail with a long-standing American suspicion of providing assistance to some sections of the population, including those who may be in some way “undeserving,” such as those who do not work.

The program’s focus on children could be another strike against it, Philbrick says. “While younger Americans — who are more likely to be parents receiving the credit — tend to approve of it, many older Americans do not,” he writes. A new expansion of the social safety net could be seen as a threat to existing programs, including Social Security and Medicare, leading some older voters to withhold their support.

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