Published August 5, 2024
Bipartisanship in Washington, D.C. can come in many flavors. It can be meaningless lip service paid to a big problem Congress has no idea how to solve. It can be ungainly, mashing up some ideas from Team Red with other ideas from Team Blue to create an unsightly chimera. It can be small-ball tweaks that mostly fly under the radar. And, every once in a while, it can be a bipartisan bill that offers something for nearly everyone.
The Tax Relief for American Families and Workers Act of 2024 (HR 7024), which died in the Senate last week, wasn’t perfect. But it was a unique opportunity to check some boxes with significant appeal on both sides of the aisle. As Congress prepares to deal with the expiration of the Trump-era tax cuts next year, it should rely on some of the ideas in this tax deal, instead of getting distracted by other, less promising attempts at bipartisanship.
The tax deal had been negotiated by Sen. Ron Wyden (D-Ore.) and Rep. Jason Smith (R-Mo.), and passed the House of Representatives by a resounding 357-70 vote in January. It would have sunset a fraud-ridden pandemic tax credit program, and used the savings primarily to provide tax credits to businesses that invest in research and development, and expand the child tax credit (CTC) to families making below the median income. It also included some provisions relating to disaster assistance and affordable housing.
The CTC provisions were aimed at families who had lower federal income tax liability than the amount of potential credit they’d otherwise be eligible for. Imagine a couple that owed $2,500 in taxes but had two kids, which would make them theoretically eligible for $4,000 worth of CTC; under current law they receive only a portion of the $1,500 difference between those two figures. The tax deal would have increased the amount they’d be receiving; a crucial boost for low-income and some middle-income families.
The bill would have most directly benefited working-class families with multiple children, with a technical change that would have calculated their credit on a per-child, rather than per-family, basis. This could have led to families with moderate incomes and more than one child having additional hundreds, if not thousands of extra dollars each year. It also would have adjusted the CTC to account for inflation, a crucial flaw of the current status quo.
The weakest part of the bill was its provision allowing families who hadn’t earned enough income in the past year to use earnings from the prior year to maintain their eligibility for a check. It would have made the tax code clunkier and made the bill more susceptible to the claim that it weakened the connection between federal support and work. If it hadn’t been an election year, perhaps enough lawmakers could have agreed to ditch that proviso as a way of salvaging the broader push, but it became clear that senior Republican lawmakers had no interest in getting to “yes.”
The calculus was largely political—Republicans eyeing the 2024 polls expect to have more Senate seats, and potentially be in a stronger negotiating position, next year. Ultimately, only three Republican senators—Josh Hawley (Mo.), Markwayne Mullin (Okla.), and Rick Scott (Fla.)—bucked the wishes of party elders and voted for the bill. They deserve credit from those who would like to see the Republican Party devote more time and energy to the needs of working-class parents.
And that energy will soon need to be brought to bear. Next year, many of the provisions that were passed in the 2017 tax bill signed by President Donald Trump are set to expire, chief among them the expansion of the Child Tax Credit from $1,000 per child to $2,000. If Congress fails to act, it would be the equivalent of a tax hike on millions of parents across the U.S.—something every politician interested in winning reelection will likely try to avoid.
But barring unified control of government by one party or the other, the upcoming negotiations will require some bipartisanship. Elements of the Tax Relief for American Families and Workers Act may well form the basis for what Congress might prioritize, such as the long-overdue provision to index the amount of the CTC for inflation.
Other bipartisan ideas might get a hearing in a divided Congress, but with less to recommend them. In particular, recent bills to expand the Child and Dependent Care Tax Credit (CDCTC) have attracted some bipartisan support. But a push to expand the CDCTC, rather than the CTC, would leave families worse off overall.
The CDCTC reimburses families for a portion of their child care expenses. Families that have a parent out of the labor force are ineligible to claim it, even for preschool or babysitting costs. Some bills would make the CDCTC fully refundable, choosing to send federal money only to families that rely on paid child care rather than supporting families that rely on a relative or stay-at-home parent to watch young children. While tax credits for child care have a surface-level bipartisan appeal, they pale in comparison to improving the CTC, especially at a time when the federal deficit requires us to make tough choices.
In any year, bipartisanship in Congress is a rare commodity. In a presidential election year, it can be an endangered species. Working families who would have benefitted from an expanded CTC are allowed to be disappointed. But the fact that a resounding majority of Republican House members were on the record as supporting the bill, and the fact that more senators may have been interested if not for the election year timeline, should suggest some reason for optimism about the future of family-friendly tax reform.
Patrick T. Brown is a fellow at the Ethics and Public Policy Center, where his work with the Life and Family Initiative focuses on developing a robust pro-family economic agenda and supporting families as the cornerstone of a healthy and flourishing society.
