In a new report my colleague Robert Orr and I propose turning the Child Tax Credit (CTC) into a true Universal Child Benefit modeled after the Canada Child Benefit. In short, that means making the CTC fully refundable and a periodic, monthly payment, in order to reach families with the greatest childcare needs. Our proposed annual benefit of $2000 per child under the age of 18, phased-out for high income households, would not require any new taxes. At an estimated net cost of $97 billion, the benefit could be paid for several times over by consolidating existing child programs that we know to be less effective and poorly targeted. You can read the report in its entirety here.
We believe this makes our plan demonstrably superior to the recent CTC expansion proposed by Hillary Clinton. Under the Clinton proposal, the CTC remains unavailable for households with no income. However, no- and low- income households may be eligible for a suite of in-kind childcare programs and resources. This simply preserves an indignity of the current system: higher income families are entrusted with direct cash transfers and indirect tax expenditures, but no- and low-income households must continue to rely disproportionately on in-kind benefits that restrict their autonomy, and quasi-cash benefits, like SNAP, that are more culturally stigmatized than cash.
In the report you will also find:
- A concise explainer on why cash transfers are virtually always superior to in-kind benefits;
- A briefing on how the new Canada Child Benefit works and what the United States can learn from it;
- And a provisional political-economic theory for why federal spending on children is so highly fragmented in comparison to spending on adults or the elderly.
A Universal Child Benefit paid for with consolidations is by no means a new idea—the President’s Advisory Panel on Tax Reform made similar recommendations as far back as 2005. However, with others floating proposals for a national day care scheme, or new, top-down subsidies to childcare providers, we believe it is an idea whose time has come. Conservatives and libertarians alike are justifiably skeptical of a deeper federal role in childcare provision. Thus, not only is Universal Child Benefit fiscally responsible and pro-family, it also represents an opportunity for conservative reformers to advance a strong alternative to the progressive childcare agenda.
The Niskanen Center joins other individuals and organizations on both the left and right who have converged on similar proposals, but with our characteristic emphasis on policies that promote individual autonomy and government neutrality. We welcome all comments and feedback.