The Senate Finance Committee released its updated tax bill late Tuesday night, and there’s a lot to cheer populist conservatives.
The new bill raises the child tax credit to $2000, twice the current credit of $1000 per child. The earlier version of the Senate bill raised it to $1,650. A higher child tax credit is one of the biggest sources of tax cuts for many middle income families.
Senators Marco Rubio and Mike Lee, the primary proponents on Capitol Hill of a higher child tax credit, issued statements supporting the change.
“I am thrilled to hear that the revised Senate tax reform proposal will double the child tax credit to $2,000 per child,” Lee said. “Details are still being worked out and I eagerly await their release. But if true, this could provide unprecedented tax relief for working moms and dads, and a great victory for American families.”
“While I still need to see the details, I welcome news from the Finance Committee that the child tax credit will be expanded to $2,000,” Rubio said.
One of those details that remains to be seen is whether the tax credit will be refundable against payroll taxes. A tax credit that can be used to offset payroll taxes means that it benefits even taxpayers whose income tax bill falls below zero–meaning they owe no income taxes. Because those taxpayers still owe payroll taxes, the credit can be used to offset that drain on a family’s income.
As expected, the bill also eliminates Obamacare’s tax penalty on Americans who go without health insurance, what’s known as the individual mandate.
One area sure to be attacked by Democrats: the bill would set a 2025 expiration date on individual tax cuts. This is a bit of budgetary shenanigans that will allow Republicans to meet a deficit test known as the Byrd Rule that would allow the bill to be passed without Democratic votes in the U.S. Senate. In reality, of course, Republicans and even Democrats will likely be loathe to allow the tax cuts to expire in 2025, so the tax cuts are only “temporary” on paper.
Another way of looking at it: all tax cuts–and tax hikes–are temporary. They can always be reversed or extended by subsequent Congresses. So the designation of a tax provision as permanent or temporary is largely a budgetary paper-work fiction.
Nonetheless, Democrats are likely to attack the GOP bill for making the individual tax cuts temporary while the corporate tax cut is permanent.