U.S. Rep. Rosa DeLauro has been a vocal supporter of the expanded federal child tax credit that lifted millions of children out of poverty while it was in place in 2021.
Since those monthly payments ended, DeLauro, D-3rd District, and other Democratic lawmakers have been trying, to no avail, to get Congress to restore the enhancements for low-income families over the past two years. DeLauro has called the child tax credit an “antidote to inflation,” noting that eligible families used it to help them pay for expenses like food, rent and child care.
But in the early weeks of 2024, negotiators are opening the door to a possible bipartisan deal. The talks include restoring Trump-era tax deductions for businesses on domestic research and development spending and interest expenses in exchange for the expanded child tax credit in at least some form. The issues have gotten a degree of support in both parties before.
DeLauro, however, is raising red flags about the tax package, which she argues would have a watered-down version of what was implemented under the American Rescue Plan. She said she does not support a deal that falls short of the 2021 levels, particularly if more of the funding in it would go to corporate tax breaks.
“There appears to be no parity in this package between corporations and families,” DeLauro said in an interview. “At the moment, it would appear that the tilt is in favor of corporations.”
“We need to extend the expanded monthly child tax credit as we knew it, as it was in place, that succeeded,” she added. “There’s no reason why we should be trying to compromise on it.”
Democrats passed an expansion of the child tax credit through the American Rescue Plan in 2021, but it expired at the end of that year. That enhancement increased the rebate up to $3,600 per child under age 6 and $3,000 per child between 6 to 18. In Connecticut, 583,000 children qualified for getting the payments in December 2021, according to the U.S. Treasury.
Those who qualified for the full amount were working couples who made up to $150,000 or single-parent families earning up to $112,500. The 2021 law temporarily changed it so that families got monthly installments instead of receiving it all at once when filing taxes.
While the payments for the expanded federal child tax credit were not extended into 2022, Connecticut had its own state rebate available. More than 70% of eligible households claimed the $250-per-child tax credit.
The current federal tax credit is back to $2,000 per child under age 17, though it is not fully refundable. And the full credit is not available for some families because they make too little and do not owe income tax. The people not receiving the entire benefit are disproportionately families of color.
Child poverty rates have since gone back up, and experts say it is a direct cause of the expansion ending. In 2021, the rate declined to 5.2% and lowered the disproportionate impact on Black and Latino children, according to the nonpartisan Center on Budget and Policy Priorities. In 2022, the child poverty rate rose to 12.4%.
As things stand right now, DeLauro and other critical Democrats argue that businesses would essentially get a bigger tax break than families based on what she has learned from conversations about the unfinished proposal.
An analysis from the CBPP last week said it would likely lift about 400,000 children out of poverty and give a boost to another 3 million kids in the first year of its enactment. The nonpartisan organization also found it would help 80% of the 19 million children who either get a partial tax credit or do not qualify for one at all because they earn too little.
“Bipartisan tax deals are hard to craft and rarely fully satisfy anyone,” Sharon Parrott, president of Center on Budget and Policy Priorities, said in a statement. “But the number of children in poverty spiked by 5 million in 2022, and starting to reverse this trend and drive down poverty among children is critical.”
U.S. Sen. Ron Wyden, D-Ore., chairman of the Senate Finance Committee, is working with U.S. Rep. Jason Smith, R-Mo., chairman of the House Ways and Means Committee, on finishing up the bipartisan tax package, which could be up to $70 billion and extend some tax breaks for a few years. The lawmakers are considering paying for the proposal by ending a pandemic-era employee retention tax credit that has been criticized for being rampant in fraud.
The details as well as other policy priorities that make it into a deal have not been finalized. And there are still a number of outstanding questions: how much families would get from an enhanced rebate and for how long — and if they will be fully refundable again, so those who do not typically qualify would get a rebate.
But it is unlikely that an agreement will completely mirror the structure of the 2021 child tax credit. While some low-income families with multiple children could benefit more than they currently do, others could still largely get left out.
While there is technically no deadline to hash out an agreement, they are aiming to get something done by the end of the month, before tax filing begins.
“We want the biggest cuts in child poverty as possible,” Wyden told reporters last week. “We want to help as many families as possible, and we’re all in with getting this done by Jan. 29.”
The potential deal is meeting some early resistance from House Democrats as well as from some Republicans. And it comes as Congress is trying to avoid a partial shutdown on Friday by passing another short-term funding bill that could keep the government running through March.
House Minority Leader Hakeem Jeffries, D-N.Y., left the door open as to whether he would support any bipartisan agreement but echoed a similar message from Democrats like DeLauro that any boosts to the child tax credit should resemble how it was structured in 2021.
“The child tax credit must be robustly funded as part of any tax agreement that receives significant support from House Democrats,” Jeffries said. “I think it’s important that any tax deal reached with bipartisan support, that the child tax credit is fully funded in a manner consistent with what was done in the American Rescue Plan.”
And Republicans have said they are unlikely to support going back to the way the expanded child tax credit was structured in 2021. But Sen. Mike Crapo, R-Idaho, who is the top Republican on the Senate Finance Committee, sounded a note of confidence, telling NBC that he is “very committed to trying to get a resolution on the tax policies.”
Others in Connecticut’s congressional delegation are much more amenable to the agreement for businesses and families.
U.S. Rep. John Larson, D-1st District, who serves on the tax-writing House Ways and Means Committee, acknowledged the concerns some in his party have about more funding allocated to corporations. Still, he called it a “win-win situation” and said he would vote for such an agreement.
“I understand the issues that have been raised by [Rep.] Susan Del Bene and that have been raised by Rosa DeLauro from our own state,” Larson said. “I don’t see any reason why this still can’t be worked out, and I think it’s a good balance.”
“This should be a home run for both sides. As strong a supporter as I am of R&D,” Larson said in reference to the research and development tax credits for businesses. “I think this is a fair balance.”
The fate of any deal, however, is unpredictable in a divided Congress. Lawmakers are still working under tight deadlines to fund the federal government as well as trying to negotiate another deal on aid for Ukraine and Israel in exchange for border policies that could place some restrictions on immigration.
It is not a given that an agreement will yield enough support from either party in both chambers. Still, it has become more challenging for lawmakers to broker deals, especially in a presidential election year when Congress veers away from most legislation that is not mandatory to pass.
But DeLauro said she is worried that in exchange for slightly enhancing the child tax credit, Republicans will try to make the corporate tax breaks permanent in 2025 when there could be a new balance of power in Congress and the White House.
“I suppose I get a little bit tired of the commentary that ‘let’s accept an equity for families and for children so that we can pay off the corporations,'” DeLauro said. “For me personally, I’m not willing to accept that.”
The Connecticut Mirror/Connecticut Public Radio federal policy reporter position is made possible, in part, by funding from the Robert and Margaret Patricelli Family Foundation and Engage CT.
This story was originally published by the Connecticut Mirror.
