EXCLUSIVE — A center-left group released a new analysis laying out the case for Republican lawmakers to expand the child tax credit as they work to craft a massive fiscal overhaul.
Third Way, a center-left think tank, released a new report on Wednesday that advocates various enhancements of the child tax credit, including increasing the dollar amount of the credit, indexing it to inflation, and other policy adjustments. The report also includes cost estimates.
Curran McSwigan, deputy director of the economics program at Third Way, told the Washington Examiner that Republicans have a key opportunity this year to extend the current iteration of the child tax credit and to enhance it in order to help struggling families.
“What we wanted to do was present some smaller- and lower-cost options to enhance the CTC that can still have a meaningful impact for working families across the country,” McSwigan, who is the lead author of the report, said.
Republicans are working on a major fiscal overhaul that they plan to pass through budget reconciliation, a legislative process that allows for bills to bypass the filibuster and pass with only a simple majority in the Senate. The group is hoping that a child tax credit expansion is included in that bill.
The credit was previously doubled as part of the 2017 Tax Cuts and Jobs Act, also known as the Trump tax cuts. Since then, though, the power of the credit has decreased due to inflation.
The Third Way report includes recommendations for improving the child tax credit. The simplest one is just to extend the $2,000 credit, which was doubled in 2017 and will revert back at the end of this year unless action is taken.
They also propose indexing the child tax credit to inflation. This might be popular among lawmakers given the historic surge of inflation that the U.S. has experienced over the past few years. Since 2018, the value of the child tax credit has declined 22% in inflation-adjusted terms. The group notes in its report that there was a bipartisan proposal last year to tie the credit to inflation.
“We know that working- and middle-class families are seeing higher costs, whether that be child care or just at the grocery store,” McSwigan said. “And the child tax credit remains an important tool in helping them navigate these costs.”
The report also looks at increasing the credit from the $2,000 level it is at now. It notes that, when accounting for inflation, the credit should be valued at about $2,500 now.
“In addition, a larger credit value for younger children could help support families with larger costs but keep budgetary impacts lower because families with younger children typically see larger costs associated with raising a child — mainly due to the steep price tag of child care,” the report reads.
There has also been some bipartisan support for a so-called baby bonus, or providing a bigger child tax credit for the first year of a child’s life.
But the major question with any proposed changes to tax policy during reconciliation is the price tag. Third Way included cost projections in its report as well. The analysis finds that extending the child tax credit would cost the treasury $867 billion over the next decade.
Additionally, bumping the credit up to $2,500 would cost an extra $242 billion over a decade, the analysis found. Indexing it to inflation would add $89 billion, and adding a $3,000 baby bonus to the credit would also cost another $89 billion.
Some populists within the Republican Party have sought to increase the child tax credit and incentivize family creation.
Earlier this month, former House Speaker Newt Gingrich and former Sen. Rick Santorum joined a group of 31 former lawmakers, conservative intellectuals, and influential pro-family individuals in calling on the House and Senate to expand on the child tax credit while indexing the benefit to inflation.
“The child tax credit is one of the best ways to ease the increasing costs of raising a family,” Santorum told the Washington Examiner. “President Trump’s doubling of the credit in 2017 came at a critical time for working families, but inflation has eroded the value of that good work. I’m encouraged that the president and Congress have expressed interest in putting families first by permanently bolstering this critical policy.”
Some Republican lawmakers are keen to see the popular credit boosted. Rep. Blake Moore (R-UT) told the Washington Examiner on Tuesday on Capitol Hill that he sees reconciliation as an opportunity to increase the credit.
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Earlier this year, Moore introduced legislation that would expand the credit.
Moore’s bill, the Family First Act, increases the child tax credit amount from the current $2,000 level to $4,200 for families with a child up to age 5. The credit would be $3,000 for families with a child between 6 and 17. The bill also creates a $2,800 tax credit for pregnant mothers.
