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**SEPTEMBER 13, 2021**

Kuttner on TAP

How the Budget Deal Could Make the Child Tax Credit Permanent

****

Joe Biden's most transformative domestic achievement to date is the
Child Tax Credit, which is really a universal basic income for parents.
It provides $3,000 per year per child, rising to $3,600 for kids under
six. No means test is required. It helps all families but roughly the
top 1 percent.

The first monthly checks went out on July 15. Just that one check lifted
three million kids out of poverty
.
As a whole, the program cuts the child poverty rate by 45
percent-nearly in half.

The credit was part of the American Recovery Act of last March, but only
for one year. Now the Democrats hope to extend it as part of budget
reconciliation.

On that front, there is good news and bad news. The House Ways and Means
Committee has just approved the administration's proposal to extend
the program at its current level for four more years. But after 2025, it
snaps back to a $1,000 refundable credit. That would reduce child
poverty by just 8 percent-a huge cliff effect from the current 45
percent.

In principle, Congress could extend the full credit again. But of
course, there is no guarantee that Democrats will have both houses of
Congress and the White House in 2025.

Paradoxically, the rebellion by Joe Manchin and other fiscally
conservative Democrats could help preserve and extend the Child Tax
Credit. My sources say there is a leadership deal beginning to take
shape in which the spending part of reconciliation is reduced
substantially, but the deal includes $1 to $1.5 trillion in
"middle-class tax cuts."

Politically, that would allow fiscal conservatives to say that they had
cut the proposed spending, and progressives to say that the whole
package had stayed at the targeted $3.5 trillion.

And guess what? Though the Child Tax Credit disproportionately helps the
poor, it also helps the larger middle class. It's a tax cut!

The credit is immensely popular among both centrist New Democrats and
frontline House members in districts that lean Republican
.
It's also one of Nancy Pelosi's top personal priorities.

The Joint Tax Committee has just scored the four-year cost of the credit

as $556 billion. Making it permanent (in budget terms, five more years),
would cost another $700 billion or so.

(These are inflated estimates, since CBO does not count the offsetting
savings in the form of reduced poverty, healthier kids, and less drain
on social services. Economists at Columbia University's Center on
Poverty and Social Policy

calculate the true taxpayer net cost as just 14 cents on the dollar.)

There will be other items in the $1.5 trillion "middle-class tax cut,"
such as the child care credit and the repeal of the ceiling on state and
local tax deductions. But the big-ticket item should be making the Child
Tax Credit permanent, as Joe Biden's boldest legacy.

~ ROBERT KUTTNER

Follow Robert Kuttner on Twitter

Robert Kuttner's latest book is
The Stakes: 2020 and the Survival of American Democracy
.

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