It has been six months since parents received their last disbursement of the expanded child tax credit, with inflation and higher gas prices only making things worse for families in the time since. The implementation of the credit was one of Democrats’ crowning achievements in 2021, and the failure to extend it one of their most crushing blows.
Democrats appear to have largely accepted that they won’t be able to extend the child care tax credit, following West Virginia Senator Joe Manchin’s torpedoing of a major piece of Democratic legislation. The bill, formerly known as the Build Back Better Act, was meant to include major health care, climate, and tax reforms but will now instead be a shell of its previous self thanks to Manchin’s opposition. Although some Democrats, including President Joe Biden, continue to hope that a second deal may be reached to address climate change, most of the other priorities that once comprised Democrats’ legislative agenda—including the child tax credit—have fallen by the wayside.
The original Build Back Better Act would have included a one-year extension of the expanded child tax credit, which was nationally popular but greeted with skepticism from Manchin. But supporters of the credit in and outside Congress insist that they are not giving up on the fight.
“American families face rising food, gas, and tax costs. They are in desperate need of relief to deal with growing economic challenges. The most effective tool we have in the fight against rising costs is the monthly child tax credit,” argued Representative Rosa DeLauro, one of the staunchest advocates for the credit.
The expanded credit was originally established in the American Rescue Plan, the $1.9 trillion coronavirus relief bill passed in March 2021. It provided parents with up to $300 per month for children under age 6 and $250 per month for children between 6 and 17 up to a certain income threshold, and made the full credit available, for the first time, for parents too poor to file income taxes. The credit expired at the end of December, returning to its previous status of being distributed in a lump sum at tax time and largely unavailable to the poorest households.
The expanded child tax credit was the rare social policy with an immediate, tangible effect. The credit reached more than 60 million children and lifted 3.7 million children out of poverty in its final month, reducing monthly child poverty by close to 30 percent, according to the Center on Poverty and Social Policy at Columbia University. Surveys showed that recipients primarily used their credit on necessities like food, essential bills, rent, and clothing. Food insufficiency rates among households with children dropped 26 percent after the first payment was distributed, according to a study by Boston University.
And now, as inflation disproportionately affects the poorest Americans, the middle- and low-income households that would benefit most from a monthly infusion of cash have been left in the lurch with the expiration of the credit. The child poverty rate increased five percentage points in January with the expiration of the credit, representing around 3.7 million children living in poverty. Manchin said his opposition to the credit was due to his concerns about worsening inflation; one Columbia study showed that an expanded child tax credit would have a gross cost of $100 billion but a net cost of $16 billion thanks to the beneficial side effects of reducing childhood poverty.
“Imagine if a child tax credit were still in existence, what it would mean for inflation … what it would mean to help families,” said Senator Sherrod Brown, one of the credit’s champions in the Senate, on Wednesday.
Although the child tax credit is almost certain not to be in the final reconciliation bill, its supporters in and outside of Congress will still push for it to be included until the very last moment. Dorian Warren, the president of progressive advocacy organization Community Change, acknowledged that there was only a “slim chance” that it would be included in a reconciliation bill but said that activists should still press for it with the understanding that it will be a long road ahead. “We could be winning on the policy and the politics if we were actually willing to fight,” Warren said.
Some Democrats have bandied about the idea that it could be a part of an end-of-year bipartisan tax deal. Members of Congress are widely expected to work on some sort of wide-ranging tax package during the lame-duck period, between the midterm elections and before the new Congress is seated in January, to address some tax extensions that have already expired or will expire at the end of the year. Some Democrats are hoping to include priorities removed from the reconciliation bill, such as an electric vehicle tax credit, in this tax package, in exchange for some provisions Republicans want, like a tax break for millionaires. The child tax credit, they suggest, could also be included in this legislation.
“I think there’s still opportunities, especially with horse trading—there’s a lot of tax provisions that benefit businesses and the wealthy that people are going to want to try to renew,” said Senator Cory Booker. “There’s still a lot of angles to fight for this.”
Brown said that Democrats should not accept any tax cuts for the wealthy unless they are coupled with an extension of the child tax credit. This idea was also raised by Adam Ruben, the campaign director of the Economic Security Project, who suggested that extending tax breaks for research and development—which is popular on the right—could be paired with some kind of child tax credit proposal. “That helps to create a connection or an engine to leave the station, and [then] the child tax credit would be one of the cars,” Ruben said. However, this will likely be a heavy lift, as there are a multitude of other tax policy priorities that would be included in such a deal.
But there may be some openness to finding a compromise on the Republican side. Senator Mitt Romney has proposed his own child allowance, which would also be distributed on a monthly basis and is in some ways more generous than the Democratic proposal. Last month, Romney reintroduced his Family Security Act, this time with the support of two other Republicans. However, the updated bill includes some measures that Democrats greatly oppose, including a $10,000 per year income threshold. Romney and Democratic Senator Michael Bennet, one of the biggest champions of the expanded credit in the Senate, have held multiple conversations on the topic, according to a Bennet aide. For his part, Romney said on Wednesday that he couldn’t “forecast” what a future child allowance package would look like, saying that talks were in the “preliminary” stage and indicating that it was too early to start discussions on an end-of-year tax extender package.
Reinstating the expanded child tax credit could be good policy for Democrats, but more cynically, it may be good politics as well. The expanded credit was generally popular, particularly among parents. And even though the Build Back Better Act faced uniform opposition from Republicans, there’s some evidence that parents will punish Democrats at the polls if the expanded credit is not reinstated. A Morning Consult/Politico poll from April found that 46 percent of recipients of the child tax credit were more likely to support Republican candidates in the midterm elections, compared to in December 2021, when 49 percent of recipients were more likely to support Democrats. A poll conducted in January by Fighting Chance for Families found that, when told that Democrats allowed the credit to expire, trust in the Democratic Party among parents of children younger than 18 decreased by 18 percentage points.
The progressive consulting group Democracy Corps has also conducted some research finding that running on the child tax credit could be a winning electoral message; according to a recent survey, the idea is particularly popular with core Democratic voters, including Black voters and younger voters. But the child tax credit is also popular with parents, recipients of the credit, and white working-class women under age 50—a demographic that Democrats are desperate to win.
From a political standpoint, if the credit is not reinstated, it risks the “disillusionment” of critical voters, said Ruben. “Parents have really shifted, because they’re really mad about these checks running out, and they don’t really know who to blame,” he said.
But even if campaigning on the expanded child tax credit runs the risk of reminding voters how it was permitted to lapse, Democrats should still be shouting about its accomplishments in lowering child poverty from the rooftops, said Warren.
“No one’s running on the shit they delivered on, which is the most frustrating thing,” said Warren. “None of this stuff seems super complicated to me … and I’m baffled at the political malpractice in D.C.”