Democrats are currently weighing several budget gimmicks that offer the appearance of reducing the price tag of their massive $3.5 trillion spending plan. For example, the New York Times recently ventured they might extend the proposed expansion of the child tax credit (CTC) for fewer than the currently-proposed four years, reducing the apparent cost. But since President Biden and other leading Democrats have said they intend for that policy to be permanent, that would just hide even more of the out-year costs, which already exceed $1 trillion over the next decade. Instead of relying on such phony budget gimmicks, if policymakers retain this CTC policy, they could instead adopt two commonsense changes yielding real savings by preventing these expanded benefits from flowing to those who shouldn’t receive them in the first place.
The first change is to ensure these monthly federal checks aren’t paid to parents who are in the US illegally. The Center for Immigration Studies (CIS) recently estimated under current proposals “illegal immigrants will receive $8.2 billion in payments from the new program annually” for US-born children in their care. Those annual payments to households headed by an illegal immigrant are greater than the $6.5 billion the Temporary Assistance for Needy Families (TANF) program distributes each year in welfare checks to all recipients, native-born and otherwise.
The CIS report also found that under the currently proposed policy:
- A greater share
of households headed by illegal immigrants (79 percent) than those headed by
legal immigrants (57 percent) or US natives (52 percent) would qualify for CTC payments. - Illegal
immigrant parents would receive larger average payments ($5,100) than legal
immigrant parents ($4,800) or native-born parents ($4,600). - These larger
payments to households headed by illegal immigrants are attributable to their
“lower average incomes” and the fact that by “dropping the work requirement”
the new policy “makes it easier for all illegal immigrants with U.S.-born
children to access the new program, even those who do not work.”
Overall, the CIS report found that “illegal immigrants could get $80 billion over 10 years” if current policy is enacted — suggesting the same amount could be saved by preventing that improper outflow before it starts.
The second change would be to ensure these monthly benefits are paid only to parents who are caring for the child in question. Such misdirected payments are not only possible, but effectively heavily subsidized, under current proposals. Millions of children, especially those in unmarried households, see their living arrangements change each year from one to another parent. Proposed “safe harbor” rules would allow significant payments to adults with whom a child is not currently living to be retained by that parent. As recently approved by Democrats on the House Ways and Means Committee, that loophole was expanded so that the wrong parent could keep up to $3,600 per child under age six and up to $3,000 per older child each year. When combined with the same amounts payable to the right parent, that could literally double the annual benefit per child to as much as $7,200.
Like letting claimants “self-certify” their eligibility for pandemic unemployment benefits, that’s a huge invitation for fraud and abuse. Lawmakers obviously recognized that risk, adding a provision in committee saying “the safe harbor does not apply if the Secretary determines that . . . intentional disregard of the rules and regulations by the taxpayer” caused a mispayment. But good luck establishing that while the IRS is sending out checks to 65 million new recipients every month. Already those new monthly payments are getting in the way of the IRS’ processing annual tax refunds in a timely fashion.
It’s
unclear how much deleting these “safe harbor” rules would save, and any such estimate
might well understate the real world losses if this policy were implemented. But
eliminating this obvious loophole would better ensure that only parents caring
for the child in question can collect monthly checks taxpayers provide for his
or her benefit.
Polls indicate that less than one-third of Americans support making these expanded benefits permanent, suggesting fundamental changes are needed if Democrats want to win over the public. These two commonsense changes — restricting payments to households headed by illegal immigrants and ensuring only parents caring for the child in question qualify for checks — would be a good place to start.
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