Bipartisan deal would help low-income Americans by expanding Child Tax Credit
STEVE INSKEEP, HOST:
Two tax writers in Congress say they've reached a deal to expand the Child Tax Credit. One of them is Republican Jason Smith, who heads a powerful House committee, and the other is Democrat Ron Wyden, who leads a powerful Senate committee.
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RON WYDEN: We've got so many families - literally millions - who every week are walking an economic tightrope.
INSKEEP: And so these two lawmakers are trying to restore some version of a tax credit that lifted millions of people out of poverty during the early phase of the pandemic. NPR congressional correspondent Deirdre Walsh is covering this story. Good morning.
DEIRDRE WALSH, BYLINE: Good morning, Steve.
INSKEEP: What does this tax credit mean?
WALSH: It means that families would be able to deduct more on their taxes for the next three years. The current refundable tax credit is capped at $1,600 per child, and this deal would increase it incrementally and adjust it for inflation starting next year. As you mentioned, there was a version of this in the COVID relief bill in 2021. This is not as generous, and it's temporary, but the Center on Budget and Policy Priorities, a nonpartisan think tank, estimates that this plan would provide relief in the first year to roughly 16 million children from low-income families.
One example they give is a parent who is a server in the food industry who earns about $15,000 a year who has two children - a toddler and a second-grader. In the first year, if this tax credit goes into law, it would increase that parent's credit by almost double, going from about $1,875 to $3,600 in that first year.
INSKEEP: OK, so this means a significant amount of extra money for somebody who, in your example, is already working but not being paid very much, and now the government is going to help them. This is something that was done during the pandemic that lifted millions of people out of poverty. According to the numbers, it worked. So why has it been so hard for Congress to bring back?
WALSH: There's been a big push from Democrats to renew this and make this tax credit permanent, but conservatives oppose doing that without tying some work requirements to this kind of federal assistance. Democrats tried to include this in a large package when they controlled both chambers of Congress, but that didn't get through. Now, this bipartisan deal has a - not as generous a version of it, and it's only temporary.
INSKEEP: And there is, of course, this whole basic argument over a universal basic income - whether the federal government should just be paying people, or whether that should be hard or not done at all. So there's a bipartisan deal now which throws in some credits for business. What are those?
WALSH: Right. This legislation allows corporations to immediately write off their expenses that they spend on research and development instead of getting that tax break over the next five years. It also allows companies to deduct 100% of the costs they invest in new equipment. The bill also has targeted relief for small businesses. Most of these business tax breaks, like the Child Tax Credit, last for three years, but the one for small businesses is permanent. Another thing I should note about this bill that's significant is a provision to expand affordable housing. It restores a low-income housing tax credit.
INSKEEP: Given that you've got a powerful Senate Democrat and a powerful House Republican on board, are the prospects good of this becoming law?
WALSH: You know, it's kind of an uphill battle. There is bipartisan motivation to act quickly. The beginning of the tax filing season is at the end of January, and this expanded Child Tax Credit would apply to the 2023 tax year. There is a split among Democrats on the Hill. Senate Majority Leader Chuck Schumer endorsed the bill, but some House Democrats say this package tilts too much in the direction of business and not enough towards kids. We could see some action quickly. They may try to attach it to a short-term funding bill to avoid a shutdown.
INSKEEP: NPR's Deirdre Walsh. Thanks so much.
WALSH: Thanks, Steve. Transcript provided by NPR, Copyright NPR.
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