Early this year, the Republican-led House passed a bill that included child tax credit (CTC) expansions crafted, ironically enough, by Sen. Ron Wyden (D-OR), the Chairman of the Senate Finance Committee. The lead Republican on that tax-writing committee, Sen. Mike Crapo (R-ID), and most other Senate Republicans consider the changes a bad deal, and oppose them, believing they will be able to negotiate a better deal next year. As a result, given the Senate’s narrow majority and 60-vote requirement to move most legislation, the House bill has long been given up for dead. But you know election season is heating up when Senate Majority Leader Chuck Schumer (D-NY) plans to roll out even “doomed” bills like this for show votes to prop up vulnerable incumbents.

That’s expected this week, just before Senators depart DC for the campaign trail. While it would be easy to simply dismiss this effort as a political spectacle, it’s also worth recalling some of the major policy reasons for rejecting the proposal.

1. The proposal effectively cuts in half the CTC’s annual work requirement.

Here’s my summary of the policy in question, and its intended direction, from January when the details of what became the House-passed bill were first released:

Other than during the pandemic and similar emergencies, the CTC has always required work and earnings in the prior year. Thus, under current law, when parents file federal income tax forms in the coming months, they must have worked in 2023 to qualify for the CTC, which will be based on their 2023 earnings. But the agreement announced yesterday. . . would allow parents to instead use earnings in either of the last two years to claim the CTC in tax years 2024 and 2025. This policy would cut the CTC’s current annual work requirement in half by allowing parents to claim the CTC for two years while working in just one. . .

If this stage is adopted, it will only help (Democrats) revive ARPA’s policy of eliminating the CTC’s work requirement altogether in future legislation. In the meantime, this step would promote less work and more collection of unemployment, food stamps, disability, and other benefits paid in lieu of working. 

More AEI analysis of work and other effects is available here and here.

2. Undermining the CTC’s work requirement is a longstanding goal of liberals bent on repealing bipartisan, pro-work welfare reforms.

AEI’s Angela Rachidi and I reviewed this theme in a February report:

Leveraging arguments for expanded COVID-19 pandemic relief, under the March 2021 American Rescue Plan Act (ARPA) policymakers unhappy with welfare reform were able to recreate unconditional monthly benefit payments to even nonworking parents in the form of the fully refundable CTC. . . Democrats designed and enacted ARPA without any Republican support. They had finally achieved their long-held goal of making the CTC fully refundable, if only on a temporary basis during 2021 and within the context of a national crisis. But the broader intent was clear. A headline from a Washington Post opinion piece in March 2021 read “Goodbye, Clinton welfare reform. Hello, child tax credit.”

3. Despite supporters’ “tax cut” marketing, the proposal is overwhelmingly about providing bigger government benefit checks to households that don’t even owe federal income taxes.

President Biden and other supporters of paying bigger CTC checks often cast such changes as “tax cuts for working families.” In reality, this proposal (H.R. 7024) offers new CTC benefits for years when parents don’t work—and most of the expansion has nothing to do with cutting taxes. As Rachidi and I noted in our February report:

Despite the “tax cut” rhetoric proponents regularly apply to such changes, another noteworthy feature of the expansion of the CTC proposed in H.R. 7024 is its decided tilt towards expanding federal outlays on benefits rather than providing Americans with tax relief. In fact, as displayed below, H.R. 7024 directs an even greater share of its CTC costs toward benefit payments (91 percent) and less to tax relief (9 percent) than even Democrats’ ARPA law or their Build Back Better legislation that would have extended ARPA’s full refundability and related policies (Figure 2).

Figure 2. Share of Proposed Child Tax Credit Expansion Devoted to Benefit Increases Versus Tax Cuts

Evidence continues to mount—including in a recent report by Harvard’s Raj Chetty and colleagues—that work is the key to upward mobility. That only reinforces that the Senate should reject policies that discourage work.

Beyond such important policy arguments, there is another dispositive reason for senators to reject this legislation. If this House-passed bill were approved now, within weeks Democrats would be holding expanded CTC check-paying rallies in the run-up to election day. The Biden-Harris administration is already engaged in shameless efforts to buy voter support. There is absolutely no reason for Senate Republicans to offer their help, or votes, for that partisan exercise.

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