Key Senate Republicans’ Reported Position on Child Tax Credit Would Weaken Bill’s Support for Kids and Families, Inserts Poison Pills

As key Senate Republicans continue to block movement on the House tax bill that passed weeks ago with a wide bipartisan margin, Senate Finance Committee Ranking Republican Senator Crapo’s latest proposal to Committee Chair Ron Wyden, as outlined in a recent Politico article, would result in higher child poverty. It would make children in families with parents who work for low wages worse off relative to the House-passed bill — and some children worse off than under current law. It would inject poison pill measures that appear designed to kill the legislation altogether — all while not agreeing to a process to move forward even if the proposed changes were accepted.

To recap events before this latest twist: in a sweeping bipartisan vote that included 169 House Republicans, the House in January passed what appeared to be a classic tax compromise headed toward speedy enactment. The legislation paired a package of business tax breaks (with which, to be sure, we had many concerns) with improvements to the Child Tax Credit that would benefit 16 million children in families with low earnings. The bill kept a requirement that parents have earnings in order to claim the Child Tax Credit, which was the main design parameter Republicans on both sides of the Capitol insisted upon (and one we disagree with). Finally, the bill was paid for with a bipartisan crackdown on rampant tax fraud in a pandemic-related tax provision.

Senate Republicans originally raised concerns about the so-called “lookback” provision, which allows families whose earnings decline in a year to use their prior year’s earnings to calculate the credit. They claimed the provision undermined the work requirement — though a wide range of analysts and outlets from across the political spectrum concluded the lookback poses no significant threat to employment. In response, Senator Wyden offered to drop the lookback provision and shift the money toward other Child Tax Credit improvements that would help children in families with low earnings, consistent with maintaining the earnings requirement to move the process forward.

In response, Senate Republicans appear to have moved the goalposts. In addition to objecting to the lookback provision, Politico reported that Senator Crapo has demanded policy changes that would:

• Take away the Child Tax Credit from U.S. citizen children whose parents are immigrants who file their taxes using an Individual Taxpayer Identification Number, not a Social Security number. In what is an obvious poison pill that Democrats would reject out of hand — and is harsher than the requirements Senate Republicans adopted in the 2017 tax law and the bill House Republicans just voted for — some Senate Republicans are now reportedly trying to deny the Child Tax Credit to citizen children whose parents work and pay taxes but do not have Social Security numbers.
• Make many working families with low incomes worse off than under the House bill. The House-passed bill over time eliminates the so-called “refundability cap,” a provision of the current credit that perversely imposes a separate, lower maximum credit on families working for low pay. (Under current law, the cap is $1,600 for tax year 2023 and is adjusted for inflation. The bill would raise that cap to $1,800 per child for 2023, $1,900 for 2024, and, for 2025, effectively ends it by syncing it to the same maximum that wealthier families get.) Senate Republicans reportedly propose retaining a stricter refundability cap, which prevents many children whose parents work for low wages from qualifying for the full Child Tax Credit. This late objection comes despite proposals from some Senate Republicans in prior years that eliminated the refundability cap.
• Establish double standards. The House-passed bipartisan compromise bill set up two forms of “parity.” First, based on estimates from the Joint Committee on Taxation, both the business tax package and the Child Tax Credit improvements for children in families with low earnings would cost about the same amount. Second, the business and Child Tax Credit provisions would be in effect for roughly the same years. The Senate Republicans are reportedly now trying to undo both. They are trying to reduce the amount of Child Tax Credit improvement that would flow to families with low incomes and delay the Child Tax Credit improvements until tax year 2024. Meanwhile, many businesses would be able to get retroactive tax cuts back to 2022.

The reported Child Tax Credit proposals will make children worse off as compared to the House bill in two ways.

First, if enacted, they would result in higher child poverty and make children in families with parents who work for low wages worse off relative to the House-passed bill — and take the credit away entirely from some children who are U.S. citizens, exacerbating poverty and hardship as compared to the current law passed by Republicans during the Trump Administration.

Second, the changes would virtually guarantee that the tax bill will die in the Senate — which means that 16 million children whose parents work but have low earnings won’t get any additional help paying their bills and a half million or more children will needlessly remain in poverty. Killing the bill would hurt not only working families but also small and large businesses seeking tax benefits that Republicans have said repeatedly that they support. And it would reduce resources that are designed to build more affordable housing for low-, moderate-, and middle-income families.

If the House bill dies in the Senate, the only winners are people committing tax fraud — families and businesses would lose.