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- Ivanka Trump is leading the White House’s effort to promote an expansion of the child tax credit. But the GOP tax reform plan released Thursday falls short of her proposals. Meanwhile, Democrats and tax policy experts are critical of both the House plan and Ivanka’s proposal, which she’s made in conjunction with some GOP lawmakers.
Over the past several months, Ivanka Trump, the president’s eldest daughter and a top White House adviser, has been working largely behind the scenes to shepherd an expanded Child Tax Credit into the GOP’s tax reform plan.
But she has met resistance from the Republican Party, which, as part of the House’s tax overhaul plan unveiled on Thursday morning, proposed a much more modest expansion of the credit than that Ivanka has been pushing for.
The policy as it stands today provides relief to working parents by giving them a non-refundable tax credit of up to $1,000 annually, and it has had bipartisan support since it became law in 1997.
But Democrats and some Republicans, including Ivanka, agree that an expansion is key to helping middle and working class families whose wages have stagnated and child-care costs have spiked in recent years.
The House plan, which proposes a $1,600 tax credit per child and a $300 credit per parent or non-child dependent until 2023, falls short of Ivanka’s goal and doesn’t come close to satisfying Democrats.
But Ivanka’s position has evolved since the Trump campaign released its original child care proposals, which involved making child-care costs tax deductible and was widely criticized for benefiting higher-income families vastly more than low-income ones.
Elaine Maag, a senior research associate at the Tax Policy Center, thinks that Ivanka’s position likely changed as she became more educated on the issue and realized that the child tax credit reaches many more families than a child care credit could.
“It might have been unintentional to leave out low-income families,” Maag told Business Insider. “When you are very high income, deductions are very valuable to you – it’s plausible to me that she would imagine that everyone would benefit from a deduction. Once she learned more, maybe she realized that’s just not true, low-income families don’t need to deduct more income from taxation, they need credits to reduce their bottom line.”
Ivanka and Rubio face an uphill battle against the GOP
Part spokesperson, part negotiator, Ivanka has led the White House’s effort to promote the effort, using the small but important piece of tax reform as an opportunity to translate her campaign promises, which centered on helping women and working families, into policy.
In the months and weeks leading up to the congressional debate, she’s met with dozens of lawmakers, conservative advocacy organizations, and business groups to build consensus and support for a plan that adopts parts of a 2015 proposal by Republican Sens. Marco Rubio and Mike Lee.
Rubio has long supported an expansion of the child tax credit, and wants to double the credit to $2,000 and make it refundable for low-income families to who don’t earn enough to pay federal taxes, and thus don’t qualify for any credit.
Last month, Rubio argued that a $2,000 credit is “actually not a very negotiable number because anything less than that doesn’t really achieve the goal.”
But Democrats and some tax policy experts say that while his proposal is a step in the right direction, it doesn’t do enough to support low-income families who arguably benefit most from the extra income.
Ivanka largely adopted Rubio’s plan, but stopped short of supporting phasing in the credit at the first dollar earned, rather than after the first $3,000 in earned income, as the policy stands now.
“A significant expansion of the Child Tax Credit will help parents have more money at a time in their lives when they need it the most and give them the flexibility to make the best choices regarding their families’ care,” Ivanka said in a statement late last month. “We’ve been deeply committed to helping parents afford the costs of raising and caring for their children since the early days of the administration and will continue to advocate for relief for American families in the coming weeks.”
On Thursday morning, Rubio responded to the House proposal, tweeting that the expanded child tax credit doesn’t go far enough.
“House #TaxReform plan is only starting point. But $600 #ChildTaxCredit increase doesn’t achieve our & @potus goal of helping working families,” the senator wrote.
Ivanka, who arrived in Japan for a scheduled visit on Thursday, was silent on the issue.
All GOP proposals do little to help low-income families
Democrats and non-partisan tax policy experts alike say the GOP plan fails to provide crucial relief to the families who need it most, while expanding benefits for the most well-off families who qualify.
Chuck Marr, director of Federal Tax Policy for the left-leaning Center on Budget and Policy Priorities, told Business Insider that under the new plan, a single parent with two children who works full-time at minimum wage “would be completely left out” of the expanded credit, while high-income families will see “dramatic” gains.
The CBPP found in a recent study that 16 million children in low-income families would be excluded from the benefit entirely, as their parents don’t make enough to pay federal taxes and thus receive a refund.
“That is not only unfair, but it’s a policy mistake in that those [low-income] kids would be the ones who would benefit the most,” Marr said, adding that a large body of research has found that extra income for poor families improves their kids’ health, education, and career outcomes.
Maag said that the new plan is “heavily tilted towards high-income families.” She added that the credit is regressive over time, as it will stay capped at $1,600, while the personal exemptions that they replace were adjusted for inflation.
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A GOP bargaining chip
Experts say the child tax credit is a crucial measure to offset the tax plan’s elimination of personal exemptions, which currently provide significant relief for middle income families.
“At the same time as they have these massive tax cuts for the richest people in the country they actually increase taxes for a lot of working and middle class people, and so I think they see the child tax credit as a way to try to address that,” Marr said.
While the credit is a “tiny, tiny piece” of broader tax reform, Maag says, it could become a crucial bargaining chip in the coming debate in Congress.
“If it becomes important that either low- or middle-income families benefit significantly and directly from the tax bill in order for it to move forward then I think the child tax credit is going to be a big player in seeing that that happens,” Maag said.