Washington DC, November 29, 2017 – Today, Senators Marco Rubio (R-FL) and Mike Lee (R-UT) will introduce an amendment to the Senate tax bill that substantially improves the Child Tax Credit (CTC) for working families. The amendment will make the CTC refundable against the 15.3 percent Social Security and Medicare payroll taxes, and index the maximum $2,000 per-child credit level to price inflation.
“The principle effect of this amendment will be to put cash back into the pockets of working-class families,” said Samuel Hammond, the poverty and welfare policy analyst for the Niskanen Center. “For instance, under this amendment a family with two children earning roughly $26,000 would see their entire payroll tax refunded, capturing the full credit per-child. With two-thirds of Americans paying more in payroll taxes than federal income taxes, payroll tax relief is the most direct means of supporting working families, and a necessary step toward addressing the economic and social crises facing families in the parts of the country that have been left behind.”
Hammond also praised the amendment for embracing the recommendation of the Niskanen Center’s coalition statement at www.ExpandTheChildTaxCredit.com to index the credit to inflation, saying: “Indexation ensures the real value of the credit will remain constant over time. In recent years, the lack of indexing allowed the credit to lose nearly a quarter of its value since it was last expanded.”
The amendment proposes paying for these improvements by setting the corporate rate at 22 percent, rather than the 20 percent rate proposed in the base Senate bill. A 22 percent corporate tax rate remains two percentage points below the OECD average, and four percentage points below the G20 average, suggesting the amendment does not sacrifice the future competitiveness of the U.S. business tax code. Instead, as Hammond put it in a new op-ed in The Atlantic with W. Bradford Wilcox, the amendment sends a strong signal that working-class families ought to come before the interests of the donor-class.
The Niskanen Center is a Washington, D.C.-based think tank that works to change public policy through direct engagement in the policymaking process.