Every Republican member of the House Ways and Means Committee voted this month for Chairman Jason Smith’s (R-MO) bipartisan Tax Relief for the American Families and Workers Act. The only three dissenting votes on the committee came from Democrats.
The legislation would make permanent much of former President Donald Trump’s signature legislative accomplishment: the Tax Cuts and Jobs Act of 2017. Unfortunately, some normally reliable conservative voices are being raised against the deal. We think their concerns are unfounded.
The Wall Street Journal never liked that 2017 bill’s expansion of the child tax credit, a provision the publication editorialized against several times. But majorities of Republicans in the House and Senate sided with the public and passed the legislation, and the child tax credit expansion turned out to be one of its most popular parts.
The Wall Street Journal is again exaggerating claims that the child tax credit “undermines the incentive to work.” The Heritage Foundation makes a similar claim in its analysis. Technically, these concerns are not completely unfounded. A parent must earn at least $2,500 a year to qualify for the benefit. The Smith legislation keeps that $2,500 requirement, but allows parents to use a previous year’s income to qualify. This would allow a new mother or a sick parent to qualify for the credit even if they were not able to work for most of one year.
The Wall Street Journal thinks this new forbearance will lead thousands of single mothers to game the system by working one year and taking the next year off. But this is not how real parents behave. If people know they never have to work to get a check, they don’t work. But parents who know they must work to put food on the table one year will not quit the next year, especially given other work incentives such as the earned income tax credit. That is why both the Joint Committee on Taxation and the Tax Foundation have concluded that the new bill does not disincentivize work.
Other conservative voices, including that of Rep. Scott Perry (R-PA), claim the bill would allow illegal immigrants to take the child tax credit. This is an unfounded concern. Perry voted for the 2017 legislation which contained much-needed reforms to the child tax credit system. Before its passage, parents claiming the child tax credit did not need to include a Social Security number for the children they claimed. The change in 2017 cut improper child tax credit payments by half. The new bill keeps the 2017 safeguard requirement, a key win for conservative negotiators against Democratic pressure to drop it.
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Bipartisan legislation involves compromise. But Chairman Smith got the better side of the bargain this time. Democrats wanted $3,600 a year for younger children ($3,000 for older children), fully refundable with no work requirements, no citizenship requirements, and benefits paid in monthly checks like welfare benefits. Smith nixed all of that.
Pro-growth tax reform is important. The new bill keeps almost all of the 2017 pro-growth reforms. It also encourages necessary family formation. It is strong conservative policy and the House should pass it as soon as possible.