Jessica Hill/AP Photo
Speaker of the House Nancy Pelosi speaks as Rep. John Larson (D-CT) stands by during a news conference at Goodwin University, September 8, 2021, in East Hartford, Connecticut.
Joe Biden’s most transformative domestic achievement to date is the Child Tax Credit, which is really a universal basic income for parents. It provides $3,000 per year per child, rising to $3,600 for kids under six. No means test is required. It helps all families but roughly the top 1 percent.
The first monthly checks went out on July 15. Just that one check lifted three million kids out of poverty. As a whole, the program cuts the child poverty rate by 45 percent—nearly in half.
The credit was part of the American Recovery Act of last March, but only for one year. Now the Democrats hope to extend it as part of budget reconciliation.
On that front, there is good news and bad news. The House Ways and Means Committee has just approved the administration’s proposal to extend the program at its current level for four more years. But after 2025, it snaps back to a $1,000 refundable credit. That would reduce child poverty by just 8 percent—a huge cliff effect from the current 45 percent.
In principle, Congress could extend the full credit again. But of course, there is no guarantee that Democrats will have both houses of Congress and the White House in 2025.
Paradoxically, the rebellion by Joe Manchin and other fiscally conservative Democrats could help preserve and extend the Child Tax Credit. My sources say there is a leadership deal beginning to take shape in which the spending part of reconciliation is reduced substantially, but the deal includes $1 to $1.5 trillion in “middle-class tax cuts.”
Politically, that would allow fiscal conservatives to say that they had cut the proposed spending, and progressives to say that the whole package had stayed at the targeted $3.5 trillion.
And guess what? Though the Child Tax Credit disproportionately helps the poor, it also helps the larger middle class. It’s a tax cut!
The credit is immensely popular among both centrist New Democrats and frontline House members in districts that lean Republican. It’s also one of Nancy Pelosi’s top personal priorities.
The Joint Tax Committee has just scored the four-year cost of the credit as $556 billion. Making it permanent (in budget terms, five more years), would cost another $700 billion or so.
(These are inflated estimates, since CBO does not count the offsetting savings in the form of reduced poverty, healthier kids, and less drain on social services. Economists at Columbia University’s Center on Poverty and Social Policy calculate the true taxpayer net cost as just 14 cents on the dollar.)
There will be other items in the $1.5 trillion “middle-class tax cut,” such as the child care credit and the repeal of the ceiling on state and local tax deductions. But the big-ticket item should be making the Child Tax Credit permanent, as Joe Biden’s boldest legacy.
