WASHINGTON ― Democrats this week announced new legislation that would slash child poverty by paying parents the kind of monthly allowance that is standard in other developed countries.
But the lawmakers who introduced the bill, called the American Family Act, didn’t use the terms “child benefit” or “child allowance” at their Capitol Hill press conference Wednesday. Instead, they all called it a tax credit or a tax cut.
“This is not a massive new federal program,” Sen. Michael Bennet (D-Colo.) said. “It cuts child poverty by 40 percent, but it does it as a tax credit.”
The bill would give most parents of young children $300 per month in cash. Other countries have enacted similar policies, based on the recognition that having children simultaneously costs parents a lot of money and makes it more difficult for them to work. And most other countries have less child poverty.
The new proposal comes on the heels of a watershed National Academy of Sciences report released last week that found that a child benefit is one of the best ways to reduce poverty for children, who in the U.S. are poor at a higher rate than Americans of other age groups. Child poverty is also bad for our economy ― we currently lose as much as $1 trillion annually through lost productivity and increased health costs as the consequences of childhood deprivations ricochet through adulthood.
Even amid a recent surge of big ideas to make American life better ― including a $700 billion national child care proposal ― the idea of “a massive new federal program” dishing out benefits is apparently still something Democrats see as a political problem. A tax credit, on the other hand, they see as something even a Republican might like.
Not that any Republicans have signed on to the American Family Act, which Bennet introduced with Sen. Sherrod Brown (D-Ohio), Rep. Rosa DeLauro (D-Conn.) and Rep. Suzan DelBene (D-Wash.). A majority of Democrats in both the House and Senate have already signed on as cosponsors, meaning it’s theoretically popular enough on Capitol Hill that Democrats could enact it into law if they ever win back the White House and the Senate.
The idea of ‘a massive new federal program’ dishing out benefits is apparently still something Democrats see as a political problem. A tax credit, on the other hand, they see as something even a Republican might like.
Bennet and his colleagues avoided the words “benefit” or “allowance” in their remarks Wednesday, opting for “tax cut” or “credit.” They shrugged at the distinction when asked.
“I think you could describe it either way,” Bennet said.
While the legislation is based on the existing Child Tax Credit, the ultimate policy would be different from a tax credit in important ways.
Tax credits reduce the amount of federal taxes a person owes. Refundable tax credits give people cash back if the value of the credit exceeds the amount of taxes they owe. The Earned Income Tax Credit, for instance, gives cash to nearly 28 million households annually, making it the government’s largest cash program for people with low incomes ― but nobody gets a dime from either program unless they’ve earned a certain amount of money each year. And the child credit, currently worth $2,000, is only partially refundable.
The American Family Act would do away with the Child Tax Credit’s earnings requirement, boost its value to $3,600 for families with kids younger than 6 (or $3,000 for kids younger than 17), and make it fully refundable. And instead of a cash refund near the beginning of the year, the IRS would distribute the credit as a monthly advance. Monthly distribution resembles a Social Security-style benefit more than a tax cut.
The proposal would cost $91 billion per year, according to an analysis by Columbia University’s Center on Poverty & Social Policy. That’s a bigger annual expenditure than the Supplemental Nutrition Assistance Program, but a smaller one than the Tax Cuts and Jobs Act. (The Republican tax law doubled the value of the credit and made wealthier households eligible for it.)
An array of poverty experts have endorsed the American Family Act, which they note would create a child allowance.
“The United States spends less on child and family benefits than any other industrialized country,” resulting in relatively high child poverty, said Samuel Hammond of the libertarian-leaning Niskanen Center. “The American Family Act addresses this problem head-on by creating a monthly child allowance, inspired by the best in evidence-based policy.”
“The United States stands out from other advanced economies in not having a universal child benefit that provides help to all families with children,” said Jane Waldfogel of the Columbia University School of Social Work.