The Real Cost of CTC Expansion vs. Corporate Tax Cuts

It is American children who need our help, not cash-rich multinational corporations.

by Zachary Tashman

Rumors abound that Democrats and Republicans are negotiating an end-of-year tax trade: a short-term improvement to the Child Tax Credit (CTC) sought by Democrats in exchange for three corporate tax cuts the GOP and their corporate donors desire. Republicans claim—and reporters parrot— that $49 billion for CTC expansion would be equivalent to the revenue lost from expanding these three corporate tax breaks through the end of 2025. Putting aside that expanding the CTC would pull millions of kids and families out of poverty, while giving additional tax cuts to mega-corporations is more likely to go into the pockets of executives and wealthy shareholders then help workers, Republican’s math on this supposed “one-for-one exchange” doesn't add up, and this deal would short change families. 

Republicans are using budget gimmicks which make these corporate tax giveaways appear much cheaper than they actually are. Two of the breaks would alter the timing of deductions: companies could deduct immediately all the costs of buying big-ticket items and conducting research, whereas current rules require them to write off those costs over time. If the corporate lobbyists get their way, companies will be deducting costs now that they would otherwise deduct later. Since it’s just a timing shift—costs deducted in the current year would be unavailable to deduct in later years—the overall cost does not seem high over the 10-year standard interval used for budgeting. 

We can't predict what will happen in those so-called “out years,” but if history is any guide, Republicans are not going to suddenly have a change of heart and accept expiration of these taxes in two years. Corporate lobbyists have made clear that they want the looser rules made permanent, in which case there would be no extra revenue in later years to make up for the revenue lost now. 

So the simplest and fairest way of comparing the cost of the corporate loopholes and that of the CTC expansion is to look at their cost in the years the tax changes would be in effect under the deal currently under discussion. The Joint Committee on Taxation has determined that the cost of the three breaks (which also includes a more generous business-interest deduction) would over the three years 2023, 2024 and 2025 lose more than $220 billion in federal revenue if the corporate tax breaks were made permanent. So for the Democrats and children from low-income families to get the same amount as the Republicans and their corporate friends, the CTC should be expanded and improved to the tune of $220 billion, not $49 billion.

Again, in the larger scope of things, it is American children who need our help, not cash-rich multinational corporations. But if you’re going to make a deal, at least make it fair and have real dollar-to-dollar parity.