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Even Congress’s “Tax Extenders” Are About More Benefits

Washington Examiner

January 10, 2024

Congress’s long list of unfinished business for the new year includes “tax extender” legislation, which is normally considered before lawmakers adjourn for the holidays in December. The fact that this legislation has lingered into January isn’t the only oddity. In an era of already rapidly rising spending, the more troubling anomaly is much of that supposed tax legislation isn’t about taxes at all — it’s about increasing benefits. 

Despite no hearings or legislative action, news accounts at the end of last year regularly suggested that congressional tax writers were meeting behind closed doors to develop a tax extender package. That’s the Beltway term for legislation that would continue temporary tax policies set to expire at the end of the year. While permanence is important for tax law, setting a Dec. 31 expiration date has appeal on both sides of the aisle. Nominally, “temporary” provisions seem cheaper by revealing only the short-term cost of policies lawmakers want to make permanent. And an end of December expiration date aligns with when Congress frequently considers must-pass legislation, to which tax extenders are often attached like policy ornaments on a legislative Christmas tree. 

Except this Congress kicked its end-of-year budget deadlines into January and February, which is the new schedule for the big spending bills on which tax extenders might hitch a ride. The current extenders package reportedly includes business tax relief coupled with expansions of the child tax credit. The business tax policies would reduce revenue, but the CTC expansions are likely to include little, or even no, tax cuts. That’s because, despite the name, most child tax credit policy under discussion involves growing government benefit checks, not providing additional tax relief.

How do we know? Because that’s the DNA of the temporary CTC expansion Democrats created in 2021 and are seeking to revive. That expansion increased the CTC from $2,000 to as much as $3,600 per child, allowed payments to be made in monthly installments (like welfare checks instead of annual tax refunds), and paid the full CTC even to parents who don’t work or owe income taxes. The last policy, deceptively called “full refundability,” is a classic example of Washington doublespeak. Instead of fully refunding federal income taxes a parent has paid, it provided full CTC benefits for the first time even to parents who didn’t owe those taxes in the first place.  

The authors of the temporary 2021 expansion tried to mask the trillion-dollar cost by authorizing it for only one year, banking on a groundswell of support to extend it that never came. Despite holding majorities in both the House and Senate at the time, Democrats couldn’t overcome objections to the expansion’s enormous cost and anti-work features

With Republicans now in charge of the House, calls to revive the 2021 expansion are back yet again, this time as the price to pay for unlocking business tax relief.  

Reports suggest Democrats are particularly focused on reviving full refundability — that is, paying full CTC checks to even non-working parents. That’s tantamount to reviving the work-free welfare checks that ended decades ago under bipartisan reforms signed by President Bill Clinton. It’s also a reminder that, in his latest budget proposal, full refundability was the only CTC policy President Joe Biden proposed making permanent — indicating its high priority for his left-wing base. 

The nonpartisan congressional Joint Committee on Taxation previously confirmed that full refundability would have yielded only bigger benefit checks for parents who don’t owe federal income taxes in the first place. That naturally belies the program’s moniker and Democrats’ “tax cut” marketing.

Perhaps it was inevitable that proposals to revive the 2021 CTC expansion would someday find their way into a tax extenders package. But that should only heighten concerns that Democrats’ demands for full refundability have nothing to do with providing tax relief and everything to do with increasing government benefit checks. If lawmakers want to ring in the new year by pairing business tax relief with individual tax cuts, they should first ensure those policies are actually about tax relief and not simply more benefits.