A couple of days ago I wrote about the new bipartisan bill to expand the Child Tax Credit and lower taxes on business. The topline numbers were simple: over ten years the CTC would be increased by $33 billion while taxes would be lowered by $33 billion.
But David Dayen says this is misleading. We now have an official scoring of the bill and here's how things look year-by-year over the next decade:
The CTC is extended for three years and then goes away. It costs $33 billion over three years and $33 billion over ten years.
The tax cuts are different. They allow corporations to get some tax credits now instead of waiting for them, but eventually they have to pay the taxes they avoided. So during the first three years they save $177 billion. Then they start paying up, and over ten years the net benefit drops to $33 billion.
Which do you think is the fairest way of comparing the two? If you compare over three years, the tax cuts are five times bigger than the CTC. If you compare over ten years they're the same size.
So the question is, do you believe that companies will ever have to pay those taxes they avoided? Or will Congress inevitably extend the tax breaks? David thinks the latter, and not without good reason.
What's even worse is that after 2026, not only does this expansion of the CTC go away, but so does the expansion from the Trump tax cuts, which expires in 2025. At that point the CTC plummets, which David thinks is a problem:
Settling for less now—much less, as the JCT score makes clear—makes an unequal trade more likely in a future under divided government, which is quite possible. After 2025, the CTC is chopped in half. If this deal becomes a “tax extender” precedent, in 2026 Republicans would get their favorite business tax credits and Democrats would get a little more refundability on a $1,000 CTC.
This is all speculative, which makes it very hard to have a firm opinion. What makes it even harder is that the biggest share of the tax cuts comes from pulling in the R&D tax credit, which is generally well thought of by both liberals and conservatives. So even if it's bigger than the CTC, maybe that's not such a bad thing?
Another benefit of the bill is that it's paid for by ending the Employee Retention Credit, a widely abused corporate benefit passed during the pandemic. I have no idea why it's still around, but in any case it would be good to get rid of it.
So this is a tricky one. But there's one thing that hasn't changed: it's still widely believed that this bill has little chance of passing. So maybe it doesn't really matter much.
Sounds bad.