After a series of controversial remarks in which he portrayed leading Democrats as “anti-family,” Republican vice presidential candidate Senator JD Vance is seeking to escape what some perceive as the negative political spotlight – this time with a focus on the federal Child Tax Credit (CTC).
Less than two weeks after the cancellation of a Senate vote that increased the child allowance and failed due to Republican resistance, Vance came up with the idea of increasing the credit from the current $2,000 by 150 percent.
“I mean, look, I would like to see a child tax credit of $5,000 per child,” the Republican senator from Ohio told CBS’ Face the nation“But of course you have to work with Congress to see to what extent this is possible and feasible.”
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Vance also suggested that the CTC expansion should “apply to all American families” and not include “massive cuts” for lower-income households. Currently, the tax credit is being phased out for singles with annual incomes over $200,000 and for married couples filing jointly with annual incomes over $400,000.
There is also an income requirement, meaning parents must be working and earning at least $2,500 a year to qualify for the credit. Notably, Vance has previously told reporters that some people are “obsessed with their job,” implying that laws should support the option of a parent staying home with the children.
However, Vance has not yet clarified how his version of the CTC expansion would work or whether removing a minimum income requirement would be part of his plans.
Here’s more on what’s happening with the child tax credit, why Congress needs to act soon, and what it all means for you.
JD Vance’s Child Tax Credit Proposal
To 40 million Taxpayers claim the child tax credit every year, and in recent years several proposals have been made to extend this important tax credit to the households that need it most.
Lawmakers have long debated alternatives to improving the CTC, including:
- Credit amount: What credit amount should be available per child?
- Income limit: Abolishing the earned income threshold and providing the tax credit for low- or no-income families
- Refund limit: Determining how much of the credit should be refunded and made available to parents who owe very little or no income tax
- Age of child: Raising the minimum age for eligible children
- Inflation: Adjustment of the loan amount to inflation
- Tax return: Give parents the opportunity to use the previous year’s income as the basis for the credit
Vance’s proposal is the latest contribution to this narrative – but it has met with a muted response in Congress, among others.
“If JD Vance cared deeply about working families in America, he would have shown up on the Senate floor a week and a half ago and voted for my proposal to expand the child tax credit and help 16 million low-income children get ahead,” said Senate Finance Committee Chairman Ron Wyden (D-Ore.). said in a press statement. “He didn’t even care enough to use his platform to call on his Republican Senate colleagues to support the project.”
Sen. Wyden is co-author of the bipartisan 79 billion US dollars Tax law that would have increased the child tax credit over the next few years. The measure would have raised the child tax credit cap for low-income families so they would be eligible for the full $2,000 benefit. It would also allow parents to claim the tax credit for each qualifying child.
Ultimately, the bipartisan tax package that had passed the House of Representatives was blocked by Republicans in a procedural vote of 48 to 44 – fewer than the 60 votes needed for passage.
“It was a show vote,” Vance told Face the Nation. “If I had been there, it would have failed.”
According to the Joint Committee on Tax Questions Evaluation of the bipartisan tax bill, extending the CTC in its current form would have cost about $33 billion through 2025, and about $180 billion if made permanent. In addition, the tax relief would be funded entirely by limiting pandemic-era excess payments Employee Retention Credit (ERC).
According to calculations by the Committee for a Responsible Federal Budget, a nonpartisan think tank, Vance’s proposal would entail significantly higher costs.
Raising the child tax credit to $5,000 per child could mean “an additional $2 trillion to $3 trillion in borrowing over the next decade,” Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, told CBS MoneyWatch.
Revive debate on child allowance
If there is a silver lining, it is that Vance may have revived discussions about the future of the child tax credit. Some other proposals the Republican vice presidential candidate has put forward during his campaign include:
- Avoid unexpected medical bills for parents when visiting out-of-network doctors
- Increase in the child tax credit to USD 5,000 per child
Ongoing discussions about the child tax credit could have a positive impact, Marisa Calderon, CEO and president of Prosperity Now, told Kiplinger.
“In some ways, I’m encouraged by the fact that both parties are talking about issues where agreement is needed,” Calderon said. “Families depend on us to put our egos aside and do the hard work of making sure children don’t go hungry, that people have a place to live and that basic human needs are met.”
Since the expiration of the American Rescue Plan Act (ARPA), Democrats have been trying to reinstate the expanded federal child tax credit, but have so far failed.
According to the U.S. Census Bureau, the temporary tax measure cut child poverty by nearly half in one year, to its lowest level ever. In total, 5.3 million people – including 2.9 million children – were lifted out of poverty in 2021.
There could be a further reduction in the child allowance as early as next year.
Unless Congress reaches a bipartisan agreement to regulate the child tax credit, the tax credit will return to $1,000 per child in 2026.
The Tax Cuts & Jobs Act (TCJA) of 2017 temporarily doubled the subsidy to $2,000 per child. Without action by Congress, the age of eligible children would also be lowered from 17 to 16. The tax provision expires at the end of 2025.
Conclusion: What will happen to the CTC this year?
Although Congress failed to pass legislation to expand the CTC, the future of the tax credit will likely be a central topic of election debate.
As Kiplinger reported, Democratic presidential candidate and Vice President Kamala Harris, with the support of her running mate, Governor Tim Walz of Minnesota, called for an expansion of the CTC.
Of particular note, Walz has created a child tax credit for the state of Minnesota, the largest child tax credit in the country, at $1,750 per child. So far, 12 states offer expanded child tax credits, and more may follow.
And what are the chances that Congress will vote on the CTC expansion this year? It’s not completely out of the question, says Calderon, which is why voters should stay informed about tax policy discussions, whether at the federal or state level, during this election cycle.
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