Tax

Democrats’ plan to lift work requirement could complicate child poverty plan

It’s designed to be a guaranteed minimum income for people with kids, and it’s projected to slash childhood poverty. But critics say it amounts to no-strings-attached welfare.

Sen. Ron Wyden speaks during a Senate Finance Committee hearing.

Democrats’ bid to expand a popular tax break for children is stirring up ghosts of Clinton-era battles over welfare, which threatens to take the bipartisan sheen off their effort.

Buried in their proposal is a plan to scrap decades-old rules pegging whether someone can take the credit, as well as how much they can receive, to how much they earn. Democrats want to expand the credit to as much as $3,600 per child, from the current $2,000, and allow the needy to claim the entire break regardless of how much they make.

It’s designed to be a guaranteed minimum income for people with kids, and it’s projected to slash childhood poverty.

But critics say it amounts to no-strings-attached welfare. And they say that would be tantamount to undoing a landmark welfare agreement from the Clinton administration when lawmakers agreed to require people to work in order to receive federal assistance.

“An essential part of being pro-family is being pro-work,” said Sens. Marco Rubio (R-Fla.) and Mike Lee (R-Utah), in a joint statement. “Congress should expand the child tax credit without undercutting the responsibility of parents to work to provide for their families.”

Rubio and Lee have been prominent GOP supporters of expanding the Child Tax Credit.

Democrats scoff at such concerns.

“It’s unfortunate that Senate Republicans are using the same tired old tropes from the 1980s to argue against helping children whose parents are among the poorest Americans,” said Senate Finance Chair Ron Wyden (D-Ore.).

“This is about lifting children out of deep poverty — no parent would be able to live high on the hog because they get a few thousand dollars per year to help feed, house and clothe their child.”

The debate comes as Democrats push a major expansion of the break as part of their coronavirus relief package.

Attention has largely focused just on the proposed expansion of the credit, and plans to allow people to take it via a monthly check from the government, instead of waiting until tax time.

But the question of whether to drop work requirements looks to be a major fault line in the debate. Rubio’s and Lee’s opposition is notable because they’ve been among the most enthusiastic supporters of the break in Congress, proposing an even bigger maximum credit than what Democrats are pursuing.

The issue of work was at the heart of the welfare battles in Washington during the 1990s.

President Bill Clinton came into office promising to “end welfare as we know it” amid complaints that a decades-old program known as Aid to Families with Dependent Children — which made cash payments to poor families — had led some to drop out of the labor force and instead rely on government aid.

Working with congressional Republicans, he replaced that with initiatives like the Temporary Assistance for Needy Families that required people to work as a condition of aid.

The following year, in 1997, lawmakers created the Child Tax Credit. It generally requires people to have at least some earnings — today, it’s $2,500 — before they can begin to claim the break, and how much they receive increases with their income, up to certain limits.

Democrats want to end that, complaining it does little for the poor, who get substantially less out of the child credit than even average-income people. In 2019, those earning between $10,000 and $20,000 received an average of $850 from the credit, while people making between $75,000 and $100,000 typically received three times that, according to the Tax Policy Center.

Under the Democrats’ new plan, people with kids would automatically get $3,000 per child and $3,600 for those under age 6, up to certain income limits. That’s projected to slash the number of children living below the poverty line.

It will also make it easier to implement Democrats’ plans to allow people to take the credit in the form of a monthly payment. Without that, many more recipients — and the government — would have to track how much they are supposed to receive, which could be difficult if their income fluctuates.

To the consternation of some Republicans, Sen. Mitt Romney (R-Utah) is making the idea a bipartisan one, releasing his own plan to expand aid to parents last week that would also drop the work requirements.

Critics say the proposals would create a form of assistance similar to the old AFDC, except this time run through the tax system.

“They’re sneaking a reversal of welfare reform through the backdoor,” said Robert Rector, a welfare expert at the Heritage Foundation. “They’re saying, ‘Let’s restore welfare as we knew it.’”

“It’s deliberately under the radar because the public does not support the idea of giving aid to someone who chooses not to work.”

Advocates reject that, saying many now can’t find a job with the pandemic still raging.

They say they doubt the plan would push many who are employed to quit working because the proposed payments are not big enough to live on. Supporters also note there are still other parts of the tax code — like the Earned Income Tax Credit, which is a wage supplement — that encourage people to work.

And they say lawmakers ought to be focused on helping children living in poverty.

“It’s not undoing welfare reform — it’s just correcting an inequity in how we treat low-income children versus high-income children,” said Elaine Maag, principal research associate at the Tax Policy Center. “We ought to be thinking if we can invest in these children today so that, later on, we see benefits from those investments.”