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Democrats' newest scheme to hook the middle class on government cash

The Hill logo The Hill 6/24/2021 Justin Haskins, Opinion Contributor
a little girl walking down the street: Democrats' newest scheme to hook the middle class on government cash © istock Democrats' newest scheme to hook the middle class on government cash

In July, the Biden administration will begin sending monthly cash payments to American parents as part of the $1.9 trillion American Rescue Plan passed by Congress in March.

The payments, which will be as high as $300 per child per month, are tax credits that can be claimed in advance of the 2021 tax filing deadline in April 2022.

Under the tax credit program, which is currently slated to last only one year, parents with children under the age of six will be eligible to receive a $3,600 tax credit for every qualifying child. Parents with children aged six years or older will get a $3,000 tax credit for each of their children.

The monthly payments will provide parents with half of the tax credit promised by the American Rescue Plan up front. The remainder will be paid in 2022.

Analysts predict that about 39 million households will receive the payments, offering aid to the parents of nearly 90 percent of all children in the United States.

Democrats and President Biden, who signed the American Rescue Plan into law, are not stopping there, however. On Monday - which the Biden administration labeled Child Tax Awareness Day - Democrats launched a campaign to make the child tax credits permanent, a reckless move designed to hook millions of middle-class families on yet another unaffordable government program.

Biden and congressional Democrats are selling the tax credits as an important part of their plan to tackle child poverty. But even a cursory look at the program shows that the vast majority of the money allotted for the tax credit will end up in the hands of the middle class. Some wealthier families will also be eligible for the credits.

The fully expanded child tax credits will be available for single filers with a modified adjusted gross income below $75,000 and joint filers with an income below $150,000. Many families with incomes above those thresholds will also be eligible to receive expanded payments, but the amounts will be smaller. Needless to say, most of the children living in households earning, say, $140,000 are not in poverty.


Video: #MoneyTok: How the expanded child tax credit will put more money in your bank account soon (CBS News)

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In fact, contrary to Democrats' misleading statements, most of the costs associated with expanded tax credit will not go toward helping lower-income families. It's estimated that roughly 11 million children are living in poverty in the United States, but the expanded child tax credit is expected to impact households with a combined total of about 65 million kids. That means much of the money spent on the child tax credit will go to the middle and upper middle classes, not to impoverished households.

And because the program has no asset testing requirements, which are designed to keep government funds tied to income levels and out of the hands of wealthy families who no longer have large incomes, some wealthier families - including some millionaires - will also receive the funds.

In the wake of the economic devastation caused by the coronavirus lockdowns, a reasonable argument can be made for temporarily expanding the child tax credit for lower-income families.But there's absolutely no good justification for sending monthly cash payments to families who don't need it, especially at a time when the national debt is growing at a breakneck pace.

To illustrate just how absurd the Democrats' proposal is, consider that their plan would allow a family of five with a household income of $145,000 to receive a child tax credit totaling more than $10,000, in addition to various other tax deductions and credits, with half the funds coming by way of monthly payments. And the amount provided would not be reduced if the hypothetical family used in this example already had a massive amount of money stored in a savings account, or if the family had not been economically harmed by the COVID-19 lockdowns.

Once families start to receive hundreds of dollars every month from the federal government, it would be nearly impossible for policymakers to reverse course. The payments will be here to stay, possibly forever.

In normal economic conditions, reducing taxes is good policy. The more individuals and families have control over their own money, the better off the entire economy will be.

But Democrats' child tax credit program unjustly favors some taxpayers - those with dependent children - at the expense of others, and the truth is, the plan isn't really a tax credit program so much as it is a form of government welfare masquerading as a tax break.

When the federal government starts sending payments to households with children next month, it won't be returning taxpayer dollars or cutting spending to offset the costs of the tax credit. It will be "printing" new money and redistributing it to millions of families who aren't in poverty and don't need the cash, incurring more than $100 billion in new debt in the process. (If the tax credit expansion is made permanent, it will cost more than $1 trillion over the next decade.)

Democrats support making such a reckless, unnecessary program permanent at a time when America is already struggling to rein-in out-of-control budget deficits because they know making families dependent on government handouts is a proven method for winning elections.

Although some families in need would undoubtedly benefit from a permanent expansion of the child tax credit, the true motivation behind the move seems to be rooted in a preoccupation with maintaining political power.

Justin Haskins (Jhaskins@heartland.org) is the editorial director of The Heartland Institute and the director of Heartland's Stopping Socialism Project.

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