Vice President Kamala Harris has made expanding the child tax credit a centerpiece of her campaign, and former President Donald J. Trump has boasted that he “doubled the child tax credit.” At a cursory glance, voters might think child care subsidies are an unusual thing for opposing candidates to agree on.
It’s nothing. The common vocabulary masks deep differences over which parents the government should help and what equity means for children in a country where wealth and inequality are rampant.
Trump sees the $110 billion program primarily as a tax cut, and as president he increased the program to $2,000 per child and expanded it to higher-income families. But his policy denies full benefits to the poorest children because their parents earn too little to owe income taxes.
Harris plans to expand tax cuts and add a massive anti-poverty plan that would send checks to millions of low-wage or unemployed parents. That would turn tax cuts into guaranteed incomes in a breakthrough expansion of the safety net.
Supporters of the Harris plan argue that the payments will reduce child poverty. Critics believe that expensive welfare programs can reduce incentives to work.
“They’re both talking about something called the ‘child tax credit,’ but they’re not talking about the same policy at all,” said Scott Winship of the conservative American Enterprise Institute.
It is unusual for candidates to be so similar in their views and yet have such vastly different opinions. Republicans argue that it is logical and fair for tax cuts to target taxpayers while other programs help the poor. Calling comprehensive aid a tax cut is “an abuse of the word ‘tax cut,'” Winship said.
But Democrats argue that subsidizing child care and excluding the poorest children is immoral. Currently, the credit amount increases gradually as poor parents’ income increases, but Democrats would make it “refundable,” meaning it would be paid in full to all low- and moderate-income households. “We need to reach our most vulnerable children,” said Rep. Rosa DeLauro, D-Connecticut.
Policies like the one Harris champions have undergone some testing as part of pandemic aid, which helped cut child poverty by more than half in 2021. However, efforts to renew it failed due to unified Republican opposition.
The shift in credibility from middle-class tax cuts designed by social conservatives to progressive anti-poverty programs is a strange story in Washington. The credit came from the conservative Heritage Foundation and was aimed, in part, at strengthening marriage. The bill passed the Republican Congress in 1997 with the support of Newt Gingrich, an inflammatory speaker who attacked the welfare state.
However, as trust grew over time, Democrats sought to add a second mission: poverty reduction. It currently sends about $37 billion a year to some households that pay little or no income taxes, but if Harris increased payments to include all poor parents, that amount would more than triple. There is a possibility that it will become.
Democrats see a political lesson. While benefits to poor families under the guise of tax cuts are popular, other aid is often stigmatized as “welfare” and undermined by race- and class-based attacks.
Below is a guide to the discussion.
How do Trump’s and Harris’ plans differ?
Mr. Trump enshrined the current policy in the 2017 tax law, doubling the maximum deduction to $2,000 and targeting households with incomes up to $400,000. (The previous limit was $110,000). But millions of children receive partial benefits, and 1 in 10 receive nothing because their parents have low incomes and have little or no income tax to offset.
Harris plans to increase this credit to $3,000 per child ($3,600 for preschoolers and $6,000 for infants). Most notable was her complete inclusion of the poor, regardless of how much they worked and how much they earned. She calls her plan “tax cuts for working families,” but it would also include parents who aren’t working.
Trump has promised to update the 2017 tax law, which expires next year.
Imagine a single mother working half-time for $10 an hour while her two children are in school. Trump’s credit allows her to earn about $1,200 a year. Ms. Harris plans to provide $6,000.
President Trump’s accomplishments count for nothing when single parents with toddlers and babies quit their jobs to care for them. The Harris plan provides $9,600.
The Harris plan could increase annual costs by more than $100 billion. Columbia University’s Center on Poverty and Social Policy found that a similar program could reduce child poverty by 37 percent from current levels.
Several conservative lawmakers and policy analysts have indicated they may support expanding lending to the poor. But it’s unclear how far that will go, especially for unemployed parents. Mr. Trump’s running mate, Sen. J.D. Vance of Ohio, mentioned the $5,000 loan in passing, but did not provide details.
How did Credits begin?
The credit, now championed by the left as a guaranteed income, grew out of conservatives’ concerns that taxes would strain families and force some parents to work even though they wanted to raise their children full-time. In the early 1990s, Robert Rector of the Heritage Foundation and others warned of “family time starvation.”
Their solution, the child tax credit, was included in the 1994 manifesto “Contract with America,” which helped Republicans take control of Congress. With lobbying from the Christian Coalition and others on the religious right, Congress approved a $400 per child credit.
Democrats wanted to make low-income parents who don’t pay income taxes pay it too. Republicans rejected it, and President Bill Clinton signed the credit into law as part of a larger bill.
How did tax cuts become an anti-poverty program?
As Congress gradually increased the credit, Democrats won an amendment to make it “partially refundable,” meaning it would go to some needy households. But to receive the full $4,000 for two children, a single parent would have to earn nearly $30,000, about twice the federal minimum wage.
Efforts to target all poor families have previously supported (albeit divisively) Clinton’s efforts to “abolish welfare,” which imposed work requirements and cut cash assistance to millions of families. For Democrats, it signals a change.
One reason for the change was partisan realignment, with the party losing conservatives. Lawmakers are also influenced by research showing that childhood deprivation often has lasting effects. And because extreme inequality persists, Democrats have room to come up with bold solutions.
Sen. Michael Bennet, a Colorado Democrat who supports credit expansion, opened a recent interview with a slide deck about trends in inequality. Currently, the top 1 percent of households earn twice as much as the bottom half combined, but a generation ago the opposite was true, he said.
“Support for the child tax credit has grown because our economy has become more inequitable,” Bennett said.
Mr. Trump gave Democrats a target for their fairness claims in 2017 by expanding credit to the rich and excluding many poor families. Bennett and his colleagues introduced a bill that year that served as a template for credit expansion. Mr. Harris was the first co-sponsor.
What happened during the pandemic?
The Biden administration, which took office in 2021, expanded the scope of the pandemic relief plan. It provided up to $3,000 per year per child ($3,600 for children under 6), with the full amount going to all low-income parents. To keep costs down, Congress limited the expansion to one year.
Child poverty has fallen to an all-time low. It fell 59 percent from pre-pandemic levels to 5.2 percent (according to supplementary poverty measures). The number of children in poverty has fallen by more than 5 million. While other pandemic aid helped, the Columbia Center found that credit expansion alone reduced the population of poor children by more than 2 million.
Supporters had hoped the credit would prove so popular that Congress would not allow it to expire. But the renewal effort failed after West Virginia Sen. Joe Manchin III, then a Democrat and now an independent, warned that the aid would hamper the effort and helped Republicans block the plan. It’s over.
Credit returned to pre-pandemic limits and the child poverty rate rose to 13.7 percent, slightly above pre-pandemic levels.
Still, the episode galvanized Democratic support. “We have been looking for an antidote to poverty for a long time, and we have found it,” DeLauro said.
Why do critics oppose credit expansion?
One concern is cost. Many conservatives also worry that unconditional aid weakens incentives to work and marry, increasing the poverty they aim to reduce. “The long-term effects could be to reduce upward mobility,” Winship said.
One study predicted that 1.5 million parents would quit their jobs, while another predicted the impact would be one in four. Because the 2021 experience was so short, both extrapolate from other situations whose predictive power is uncertain.
This credit differs from traditional cash assistance in important ways. That means poor parents keep their credit even as their income increases, which may encourage them to work. Some supporters predict that the expansion of loans will help parents pay for child care and car repairs, boosting employment. Some argue that a small reduction in jobs is the price of a significant reduction in poverty.
The Clinton-era experience with the “end of welfare” casts a shadow on this debate. Many conservatives argue that tough welfare laws encourage work and that Harris’ plan is a return to failed policies. Progressives argue that barriers to aid hurt the poorest children.
Opposition to credit expansion is particularly strong among leaders of poorer states, where the immediate gains are greatest. Of the 10 states with the highest percentage of children excluded from the full tax credit, nine have Republican majorities, according to data provided by Sophie Collier of the Columbia Center.
These include Mississippi, West Virginia, and Louisiana. A credit expansion like the one Democrats are proposing would nearly double the dollars those states would receive.
What are the political lessons?
How did a program that once excluded the poor win support to send billions of dollars to them?
One explanation is that (outside of the pandemic) it’s limited to people with jobs, which boosts Republican support. Also, tax credits seem like bigger government than spending programs, although the budget effects are the same.
Additionally, the credit integrates aid to the poor into larger programs, helping to reduce racial and class tensions.
“There’s no question that it’s easier to help low-income households through the tax code and include the middle class,” said Robert Greenstein of the Brookings Institution.
Tactically speaking, tying aid to taxes also gives Democrats a horse-trading opportunity. Almost all of the increase in credit value for low-income households comes from Congress passing larger measures of tax cuts for the wealthy.
You can imagine this credit as two programs rolled into one, like Russian nesting dolls. Christopher Wimmer of the Columbia Center estimates that about half of the money refunded will go to Black and Latino families. Programs serving similar groups have often come under virulent attack. However, the tax reduction portion of the deduction is much larger and offsets that slope.
The result is a distribution of dollars that reflects the composition of the country, a tax credit similar to the United States.
What’s happening on the other side of Washington?
Eleven states have a version of the child tax credit that sends full checks to the poorest families. Most were prompted by the 2021 federal government expansion, and all but one were signed by Democrats.
Among the largest is Minnesota, where Gov. Tim Walz, Harris’ running mate, signed it last year. Provides all low-income families with $1,750 per child. The Columbia Center estimated that this measure would reduce child poverty by one-third.
According to the International Labor Organization, about 50 countries have instituted a wide range of child benefits, including for the poor. The US would have been among them only in 2021, when credit was temporarily expanding.
A study of 30 rich countries found that economic expansion has pushed the United States to 22nd place on a ranking of child poverty rates from highest to lowest.
Progressives argue that international comparisons show the United States is abandoning its children, but conservatives call international comparisons flawed and argue that poor Americans are far worse off than their counterparts in many foreign countries. They claim that their income is higher than that of contractors.
