The expanded child tax credit has been enthusiastically embraced by most Democrats as an easily promotable example of a social policy that aids families in tangible ways. On the surface, the policy would appear to be one of the few things Democrats across the ideological spectrum might agree on as they undertake the messy business of crafting a bill amenable to moderates and progressives. Here’s the basic concept: “Giving money to families on a monthly basis can cut child poverty and provide us with an easy campaign talking point.”
Democrats are hoping to fold an extension of the credit into their as-yet-unwritten multitrillion-dollar budget reconciliation deal, which already contains a slew of agenda items, including childcare, health care, and climate change. But an extension of the expanded credit is facing skepticism from a familiar dramatis persona in these recent shows of intraparty dissension: Senator Joe Manchin.
The West Virginia Democrat is a critical swing vote in the Senate, and his support is crucial for the bill to pass. Democrats are using the reconciliation process to pass the measure so that it can go through with a simple majority in the Senate, because otherwise, it will get absolutely filibustered to death, as no Republicans support it. Democrats only hold 50 seats in the Senate, so everyone must be on board for any bill to pass.
This has led to weeks of agita among all factions of the party: Moderates fret over the proposed $3.5 trillion top line; progressives say they’ll refuse to accept anything lower than that number, which is already a drop from their initial calls for a $6 trillion bill. Manchin has been a reliably skeptical voice in these debates, with worries over the price tag, the climate change provisions, the Medicare expansion, and the child tax credit—all must-have inclusions, as far as progressives are concerned.
Manchin suggested earlier this month that the extended child tax credit should include work requirements, insisting that “tax credits are based around people that have tax liabilities” and that recipients should “have a W-2 and show that they’re working.” He’s only doubled down since then. In an interview with Bloomberg on Thursday, Manchin explained that he supported “work requirements for everything. Means testing and work requirements.”
One could argue that the child tax credit is currently in the midst of means testing—it was expanded in the American Rescue Plan in March, which Manchin supported, without any work requirements. It went into effect on July 15, with three major changes: It increased the amount of the payment, disbursed it in monthly installments instead of an annual lump sum, and made it fully refundable so that families with little or no income could receive the full credit for the first time.
Proponents of the expanded child tax credit in Congress swiftly denounced the idea of adding work requirements. “I don’t really believe that it is necessary,” Representative Rosa DeLauro, who has advocated for making the child tax credit refundable for nearly two decades, told The New Republic on Friday. “It really is not a relevant conversation.”
The four senators who have spearheaded child tax credit legislation in this Congress implicitly pushed back against Manchin’s words in a series of coordinated speeches on the Senate floor on Wednesday. Senator Michael Bennet called the expansion a “pro-work policy.”
“The countries that have child allowances like this, they actually have a higher percentage of people in the workforce than we do. Because people can use that allowance to pay for a little extra childcare so they can stay at work,” Bennet said. Senator Sherrod Brown argued in his speech that “we have not recognized in this country that raising kids is work.”
Early data shows that the child tax credit is already having a dramatic impact for middle- and low-income families. Parents earning under a certain threshold have now received three monthly payments of $300 per month for a child under age 6, and $250 for a child aged 6 through 17. The benefit reaches around 60 million children in nearly 39 million households.
The Center on Budget and Policy Priorities has estimated that the expanded child tax credit would lift more than four million children above the poverty line, cutting the number of children in poverty by nearly 40 percent. A September report by Columbia University’s Center on Poverty and Social Policy found that food insufficiency among low-income houses with children dropped by 7.5 percentage points after the initial payments. Data from the Census Bureau shows that parents are using their payments on such necessities as groceries, utility bills, and rent, as well as priorities like childcare and school supplies.
But forget national data points: Manchin need look no further than his own state to see the effect of the expanded child tax credit. According to the West Virginia Center on Budget and Policy, food insufficiency among adults with children in West Virginia dropped by three percentage points after the first monthly installment of the credit.
An August report by the Niskanen Center found that, over the next year, West Virginia will have the seventh-highest net benefit from the child tax credit as a share of its gross domestic product. The report found that the expansion “will deliver a substantial boost to rural economies across the country” and that “rural America would still see a larger and sustained increase in economic output” if the expansion was made permanent.
The question of work requirements is a serious one that has been raised before, primarily by conservatives who fear that the credit will act as a disincentive for unemployed parents to find work. But studies on work requirements for social programs such as Medicaid and SNAP show that unemployment is often due to health concerns or job-related issues, not lack of interest. Moreover, work requirements often add administrative barriers to obtaining benefits—and losing them could lead to a downward spiral for families.
“I believe that we make it simple, we make it universal. Everything else around work requirements just puts barriers in the way,” Representative Pramila Jayapal, the chair of the Congressional Progressive Caucus, told reporters on Friday. Jayapal added that is is “low-income people who need it the most who actually end up coming up against those work requirement barriers.”
If work requirements aren’t as effective as they could be, what about policies without them? A study from Canada, which recently implemented a similar child benefit, found that the benefit had little to no effect on mothers’ employment. Canada saw an economic boom after the benefit was implemented in 2015, which the Bank of Canada’s governor later attributed to its “highly stimulative” effects. Moreover, a 2019 report by the National Academy of Sciences found that the vast majority of people in low-income families would continue to work after an allowance of $3,000 per child was implemented and that most would not reduce their work hours.
The credit could also offer an additional financial incentive for unemployed parents with young children to seek work, as it could help pay for childcare. Senator Raphael Warnock, the newest Democrat to make the child tax credit one of his signature issues, told reporters on Thursday that “when people can afford childcare, they’re more likely to work.”
Data shows that lifting children out of poverty helps to improve their health and school performance, and makes them more likely to be employed as adults—which in turn is better for the economy in the long term. A Columbia study providing a cost-benefit analysis of the expanded child tax credit found that increasing the credit and making it refundable would result in an increase in children’s future earnings in adulthood by $76 billion. It would also reduce the amount the government spends on health care for children, and could be seen in that aspect as a cost-saving measure.
More than 400 economists—including several Nobel Prize winners in economics—sent a letter to Senate Majority Leader Chuck Schumer and Speaker Nancy Pelosi earlier this month arguing that the expanded child tax credit “can dramatically improve the lives of millions of children growing up in the United States and promote our country’s long-term economic prosperity.”
The economists note that the credit doesn’t begin to phase out until relatively high levels of income—$75,000 for single filers, $112,000 for heads of household, and $150,000 for couples—so there is no incentive for parents to stop working. In fact, two-earner households making up to $400,000 still receive a credit of $2,000 per year under the American Rescue Plan. (Indeed, a more salient question may be whether such high-income households should still receive a significant credit. “I’m open to conversations about the wealthiest, and lowering that [threshold],” Senator Cory Booker told The New Republic on Thursday.)
The House is marking up a version of the reconciliation bill on Saturday in anticipation of a vote on Monday, although it’s unclear whether it would be able to pass the Senate in its current form. More likely, it will be revised in the Senate and then sent back to the House. But this version includes an extension of the expanded child tax credit in its current form through 2025.
If Congress fails to include an extension of the expanded child tax credit, it will expire at the end of the year, and the payments that families have grown to rely on will dissipate.
“We have a program that’s out there helping families, that’s working, addressing poverty and hunger right now,” Representative Suzan DelBene, one of the credit’s advocates in the House, told reporters on Thursday. “Kids don’t grow up in a year. Let’s keep it going.”