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Expanding the Child Tax Credit Again Would Be a Bad Move

There’s talk in Washington, D.C. this week about expanding the Child Tax Credit. Again.

And just like before, recent proposals could transform what’s supposed to be a tax credit for working parents into a welfare program detached from work. That’s a problem.

When President Biden’s temporary expansion was in effect, it converted the tax credit into a monthly welfare check, increased the amount by up to 80 percent, and eliminated work requirements. Making that expansion permanent would cost taxpayers at least $1.6 trillion, move 1.5 million adults out of the workforce, and trap millions more in government dependency.

“Expanding” the Child Tax Credit is an expensive path to dependency and further worker shortages

Like most proposals coming from the Left, expanding the Child Tax Credit has a major price tag. If Democrats had had their way and the temporary Child Tax Credit changes were made permanent—and expanded to non-citizens—the cost to taxpayers would’ve been between $1.6 trillion to $1.9 trillion over a decade. Yikes.

The cost, of course, isn’t purely financial. Writing significant monthly checks to families and not expecting the parents to work at all isn’t a great motivator to return to work. Under the temporary changes in the American Rescue Plan Act and other welfare expansions, unemployed parents could collect more in government benefits than they could from the wages of a typical full-time job.

An expanded Child Tax Credit removes incentives to work, and research shows that it will inevitably shift at least 1.5 million people away from the workforce.

With millions of open jobs and 97 percent of voters already concerned about inflation, ramping up spending to expand the Child Tax Credit again without tying it to work would continue to devastate our economy and worsen the worker shortage. So much damage has already been done by this administration. Don’t make it worse.

“But this is about helping kids get out of poverty!”

No, it’s not.

The Left likes to tout a September 2023 Census Bureau report that says the childhood poverty rate “more than doubled” in the past year. But as we previously pointed out, it’s a misleading statistic that’s painting a false picture of well-being and dependency in America:

“The statistic the Left is focusing on is from the ‘supplemental poverty measure,’ an unofficial and flawed measure that fails to properly include the value of government and employer-sponsored benefits and housing, and doesn’t measure material hardship. It’s a relative measure based on median expenditures, so it’s going to show ‘poverty’ increasing when the economy is strong and families are spending more money.”

The official poverty rate—overall and child poverty—decreased between 2021 and 2022.

The best path out of dependency is work, not more welfare.

There are major electoral consequences to expanding the Child Tax Credit

Democrats are salivating at the thought of an expanded Child Tax Credit in 2024, and it has little to do with helping families and more to do with winning votes.

Research has found that low-income voters who have never been on welfare are a demographic that can be influenced by introducing welfare into their lives.

Studies from the University of Chicago and Massachusetts Institute of Technology observed this influence in Medicaid expansion. According to their research, expanding Medicaid to a new class of able-bodied adults boosted registration and turnout by 10 percentage points among enrollees who lived in Democrat counties, but there was virtually no change in registration and turnout among enrollees who lived in Republican counties. A researcher at Vanderbilt University found that ObamaCare’s Medicaid expansion increased Democrats’ vote share between 2012 and 2016.

The Child Tax Credit was also a boost to Democrats in 2021. In December 2021, Democrats held a 13-point lead on the generic ballot among voters receiving monthly Child Tax Credit checks—a lead that disappeared as soon as the monthly checks stopped. In April 2022, Republicans held a six-point lead among this group of voters.

Is it any surprise that expanding the Child Tax Credit is on the Democrats’ wish list?

Bottom line

Expanding the Child Tax Credit is a bad idea. It was a bad idea during the pandemic and it’s an even worse idea now. With the pandemic long behind us and a persisting worker shortage, trillion-dollar welfare expansions that move a million more people out of the workforce should be a laughable concept.

If Congress wants to tackle dependency and improve the standards of living for Americans across the country, reining in spending, closing welfare loopholes like Broad-Based Categorical Eligibility, expanding work requirements, and rolling back the unlawful food stamp expansion that has dramatically increased inflation should be the priorities.

At FGA, we don’t just talk about changing policy—we make it happen.

By partnering with FGA through a gift, you can create more policy change that returns America to a country where entrepreneurship thrives, personal responsibility is rewarded, and paychecks replace welfare checks.