A Child Tax Credit Expansion Is Stuck in the Senate—Here’s Why

Senate Majority Leader Sen. Chuck Schumer (D-N.Y.) speaks to members of the press flanked by Sen. Todd Young (R-Ind.) and Sen. Michael Rounds (R-S.D.) on Capitol Hill in Washington on Sept. 13, 2023. (Alex Wong/Getty Images)

WASHINGTON—Legislation to expand the Child Tax Credit is currently stalled in the Senate amid deep disagreements about its passage before the 2024 election.

The federal Child Tax Credit was first introduced in 1997 and, presently, allows parents with children aged 17 and under to write off up to $2,000 per child on their annual tax burden, of which $1,600 is refundable. The credit was temporarily expanded to $3,000 for the year 2021 and made fully refundable—leading to an estimated 44 percent reduction in the national child poverty rate. Proponents argue it is necessary to help low-income families afford food and clothing, among other things, for their children.

In January, negotiators in the Senate and House of Representatives announced a bipartisan deal to expand the credit for tax years 2023, 2024, and 2025, which passed the House by a vote of 357–70 later that month.

However, nearly six months later, no action has been taken on the bill in the Senate, with time running out for the 118th Congress to pass it.

The ‘Lookback’ Provision

Senate Republicans have opposed the bill, objecting to a provision that would allow parents to use prior years’ income to claim the credit if their earnings fall in the subsequent year. Their stated concern is that parents who stop working altogether could claim the credit intended to help working families with children.

“Allowing individuals to receive a refundable credit when they have zero annual earnings—as the prior year’s earnings provision allows—is a departure from longstanding policy,” wrote Sen. Mike Crapo (R-Idaho), the ranking Republican member of the Senate Finance Committee, in a statement. “My key concerns, shared by many of my colleagues, remain the same – the prior year’s earnings provision must be dropped,” he noted.

Many groups have defended the prior year’s provision, or the “lookback” provision, as essential to helping taxpayers adjust to temporary changes in circumstances, such as a job loss or a parent’s sickness. The Center on Budget and Policy Priorities writes, “The lookback provision acknowledges these realities and would provide a modest income buffer when a setback occurs or when people move through cycles of life that reduce their earnings.”

Still, responding to Republican opposition, Sen. Ron Wyden (D-Ore.), the Finance Committee’s chairman and the bill’s leading proponent, has offered to drop that provision. Senate Republicans have not accepted that offer and, since then, proposed more changes to the bill, such as preventing illegal immigrants who are parents of U.S. citizens from claiming the credit, which proponents have described as a “poison pill” for Democrats that would kill the bill.

“The Senate Republican leadership has basically said, ‘We’re interested in doing this in 2025 because we believe that we will be in the majority,’ and they basically want to give the tax breaks to their business buddies and maybe offer crumbs to kids,” Mr. Wyden told The Epoch Times. “I'll change the work rules. I offered that to them, and that wasn’t good enough.”

Sen. Ron Wyden (D-Ore.) speaks with reporters at the U.S. Capitol on Sept. 11, 2023. (Drew Angerer/Getty Images)

A January report by the Joint Committee on Taxation found that the credit would increase labor supply but that the increase was “too small to be significant.”

Republicans remain firm in their position. “[T]here need to be changes that can get a majority of Republican senators’ support,” Amanda Critchfield, a spokesperson for Mr. Crapo, told The Epoch Times.

“In March, Wyden said he is done negotiating with Crapo ... Senate Republicans won’t be jammed with a take-it-or-leave-it proposition,” a Republican source speaking on background told The Epoch Times.

The 2024 Election

Senate Republicans’ new demands have led stakeholder groups to accuse them of acting in bad faith to try to delay the bill’s passage, allegedly to prevent Democrats from claiming a political victory ahead of the 2024 presidential election.

“I do not think removing the lookback provision would improve the odds of the bill passing the Senate,” Joe Hughes, a senior analyst at the Institute on Taxation and Economic Policy, wrote to The Epoch Times. “They do not want to hand the President what would widely be seen as a victory this close to the election.”

“The hang-up is less this provision and more, to be frank, about the politics,” Meredith Dodson, a senior official with the Coalition on Human Needs, which has advocated for the bill, told The Epoch Times.

Stakeholders also believe that Republicans are delaying the bill so that it will expire at the end of the 118th Congress and then be renegotiated in a new Congress with a substantially lower tax credit. Congress is expected to consider changes to the Internal Revenue Code in early 2025 when several business tax provisions of the Tax Cuts and Jobs Act of 2017—the Trump administration’s tax cut package—will expire.

Sen. Mike Crapo (R-Idaho) on Capitol Hill in Washington on Feb. 24, 2021. (Michael Reynolds-Pool/Getty Images)

“There is widespread understanding that the Republican caucus is holding ground ... because certain members believe that they will get a better ideological tax deal if they were to take back the Senate,” a source familiar with the negotiations, speaking on background, told The Epoch Times.

Mr. Crapo has rebuffed the argument that Republicans are holding out on the bill. “I don’t presume those kinds of things, and that’s not the position I’m advocating,” he said, according to comments shared by his office with The Epoch Times.

Pressure on Schumer

In response to Republican opposition, senators supporting the bill are demanding that Senate Majority Leader Chuck Schumer (D-N.Y.) schedule a vote. They hope this will compel reluctant senators to vote in favor and avoid being seen as targeting the Child Tax Credit, which is popular in opinion polls.

“I urge you to also bring this critical middle class tax relief legislation to the Senate floor as soon as possible,” wrote Sen. Jacky Rosen (D-Nev.) in a February letter to Mr. Schumer. We want to get the Child Tax Credit done. It’s an urgency,” Sen. Cory Booker (D-N.J.) told The Epoch Times.

Sen. Cory Booker (D-N.J.) speaks during a press conference on Capitol Hill in Washington on June 12, 2024. (Madalina Vasiliu/The Epoch Times)

“Many of us have made clear that we support moving forward” on the bill, Sen. Chris Van Hollen (D-Md.) told The Epoch Times. Still, his colleagues indicated to The Epoch Times that they didn’t know when a vote would occur.

Some Democrats were hesitant in their commitment to the bill.

“I haven’t made a decision on it,” Sen. Chris Murphy (D-Conn.) told The Epoch Times.

“I'll have to look at the latest negotiations,” Sen. Tammy Duckworth (D-Ill.) told The Epoch Times, though she expressed general approval of the bill.

Mr. Wyden noted that there is “substantial agreement” in the Senate Democratic Caucus on the current bill, though it would require at least nine Republican votes to clear the “cloture” hurdle of a filibuster. He did not answer when The Epoch Times asked about whether the expansion could be passed this Congress.

Advocates warn that the Senate is running out of time to act. After July 4, the body will be in session for just 55 days for the remainder of the year. The bill will lapse on Jan. 2, 2025.

“There’s limited time that the Senate’s in session,” Mr. Dodson said. “I hope that Senator Schumer will offer a clear signal that this is going to come up for a vote in July.”

The Epoch Times caught up with Mr. Schumer in the Senate foyer and asked whether the bill would come to the floor. He did not answer the question.