Why Are Corporate Tax Cuts the Price for a Stronger Child Tax Credit?
by William Rice
This holiday season, it looks like the health and security of millions of children will hinge on the ability of big corporations to squeeze one or more tax cuts out of Congress. This disturbing deal, now in the works, is more proof that corporations and their mostly rich owners have too much power. And that’s a sign that taxes on the corporations and the wealthy should be going up, not down.
Millions of kids would benefit from the return of an improved Child Tax Credit. The Child Tax Credit allows low-income parents to take better care of their children—but prior to last year many of the poorest households were excluded from the full benefits of the program. Early in 2021, President Biden and Democrats in Congress improved the Child Tax Credit to fully include those families. They also boosted the size of the credit and changed its form from an annual lump sum to monthly payouts that helped families better budget and plan.
The result was startling: millions of America’s kids were lifted from poverty, making not only their current lives better but their futures—and the future of our nation—brighter. Black and Latino children benefited most because they were disproportionately excluded from the stingier version of the program. That greater inclusion from the improved CTC thereby helped shrink the nation’s troubling racial income gap.
Then, just as suddenly as this indisputable boon to childhood well-being had been created, it disappeared at the end of 2021 in the face of Republican opposition.
In the current lame-duck session of Congress, child advocates and Democrats are trying to restore at least some portion of the enhanced Child Tax Credit. But the price is a deal with corporate lobbyists and pro-corporate members who want to restore three recently expired or about-to-expire tax breaks.
These breaks—which allow corporations to inflate their reported costs and thereby cut their taxes—were components of an earlier deal struck in 2017 when Republicans were trying to figure out how to pay for their massive 40% cut in the corporate tax rate. It was the centerpiece of the Trump tax overhaul. Republicans were just as happy not to pay for any of it, but special budget rules limited how much in tax cuts—which mostly benefited the rich and corporations—could be added to the national debt.
The solution was to make three other corporate tax giveaways temporary and therefore less costly over the decade that spending and tax plans are measured. Now time is up on the breaks, and corporations and their Congressional backers want to go back on the deal. They’re likely to ask for only short-term extensions, yet the ultimate goal is to make the three giveaways permanent—at a 10-year cost of around $600 billion.
Democrats want to make an at least partially restored Child Tax Credit the price of extending one of the corporate tax breaks—a tax deduction for research and development. Any strategy that gets more food on the table (and maybe some holiday gifts?) for America’s neediest children is worth pursuing. But it’s also worth pondering.
Why should our ability as a nation to take decent care of all our kids depend on giving more tax cuts to corporations already rolling in profits—in part from exploiting inflation to price gouge consumers—and already paying near-record-low taxes? Instead of ceding more money and power to America’s stampeding corporations, we should be reigning them in with a concerted program of fairer taxes, a program begun last summer with the corporate tax reforms in the Inflation Reduction Act. That would be another important way of providing for our kids.
Bottom line: Congress should be raising corporate taxes, not cutting them—as explained in this Americans for Tax Fairness fact sheet—and using the money to greatly expand the benefits of the Child Tax Credit.