The child tax credit is still a good conservative idea worth defending

Women and families need financial relief amid the ongoing affordability crisis – high mortgage and rental rates, high grocery prices, rising gas prices and skyrocketing utility bills. With just a few weeks left in tax season, one question is whether Congress can provide a little more relief to families through the tax code.

Tax Relief for American Families and Workers Act For 2024, a House-passed tax package that includes financial relief for working families as well as positive pro-growth tax changes for businesses sits before the Senate. There are understandable concerns about temporary changes to the Child Tax Credit provisions (CTC) included in the package – changes that could inadvertently weaken work requirements.

Here's what to understand about the CTC, the proposed changes, and the importance of the opportunity before us.

At present, CTC reduces the tax liability up to $2,000 in the credit per child, and it's partially “refundable” up to $1,600 (meaning you can still get it without any tax liability). To qualify for the credit, households must show earnings of at least $2,500 a year. It then phases out at a rate of 15 percent per dollar of earnings over $2,500.

In 2021, President Biden and the Democrats successfully distorted The CTC has been increased to $3,600 per young child and $3,000 per school-aged child, making it fully refundable, and funded through a monthly check. This was the backdoor to Universal Basic Income (UBI).

Thankfully, the Biden changes ended, returning us to Trump-era tax credits. The proposed changes would increase the refundable level for multiple tax years, tie the full credit to inflation, and allow tax filers with multiple children to receive a larger credit at lower levels of earned income. This encourages more people to work.

Leftists are promoting the Child Tax Credit as if it were their own, and touting how many children have been lifted out of poverty through the inflationary American Rescue Plan as part of Biden's remake of the CTC , Who Inspired Highest inflation in 40 years in 2022. The truth is that CTC is a conservative idea from beginning to end. The CTC was the brainchild of the Republicans as part of the 1994 Blueprint for America To increase the primacy of families in the society.

Subsequent Republican administrations and Congress expanded the tax credit and added or retained significant work requirements to ensure that it did not become another form of welfare. Ryan as Ellis Explained, “In its modern form, it is a combination of pro-family tax policy and a replacement for the now-expired dependent exemption.” Workforce participation has always been, and still is, at the heart of CTC.

Conservatives rightly believe that the proposed changes to the tax credit should not create significant disincentives to employment. One sticking point has been the “lookback” provision that allows tax filers to use the previous or current year's income to qualify for the refundable portion of the credit. This allows workers to still obtain loans; They only lose it when circumstances put them out of work for a long period of time, such as an unexpected layoff, the birth of a child, or illness. But that grace is only for one year, after which they will lose it.

some people This provision has been used as an excuse for workers to cycle in and out of the workforce – creating disincentives to work. However, many other economists across the ideological spectrum (including tax foundation, AEI, brookingsAnd this Center on Budget and Policy Priorities) criticize this argument and say that the assumption about worker behavior is unreliable. Logically speaking, would hundreds of thousands of workers really leave jobs paying thousands of dollars in weekly severance pay that they would otherwise need to pay for daily household expenses like food, child care, and clothing? Is it just a one-time tax credit to claim a few thousand dollars?

In addition, there is also a countervailing force pulling workers into the workforce. The phased-in transition to CTC will provide an incentive to more families at the lower end of the income group. congressman Joint Committee on Taxation Balances the two potential effects and finds that “the proposed expansion of the child tax credit on net increases labor supply.”

Let's not lose sight of the bigger picture. The CTC is an element of the overall tax bill that provides corporate tax changes (even if temporary) that will boost economic activity.

Unemployment rate is stable is tickingWorkers take longer to find new jobs, resulting in additional pandemic savings Empty, and declining real wages have sent working families from pillar to post. Whenever Congress can amend the tax code in ways that promote growth for businesses and provide relief to families, it should not miss the opportunity.

Patrice Onwuka is the director of the Center for Economic Opportunity at the Independent Women's Forum (iwf.org/CEO) and co-host of WMAL's O'Connor & Company.