Blogger of the Week: Josh McCabe
Wellesley College
The reason the U.S. is alone among liberal welfare regimes in excluding the poorest families from the benefits of its child tax credit is that we lack family allowances as a policy legacy on which to build support for it. The taxpayer is exalted and tax relief is a powerful currency in contemporary American politics. This poses a unique problem for anti-poverty advocates given that we know broad-based child benefits are one of the most highly effective methods for reducing child poverty. If the U.S.’s exceptionally high child poverty rate stems mostly from our nonrefundable child tax credit (CTC) then how can we overcome this obstacle?
One of the problems, as historian Molly Michelmore has pointed out, is that American left-liberals actually helped build a welfare state that privileges taxpayers over everyone else. As such, most of their arguments about poverty, social justice, inequality, and fairness are premised on avoiding raising taxes on anybody but the 1%. This is great for rallying those already on your side but do little to build bipartisan support for policies. Left-liberals need to convince conservatives of the benefits of a refundable CTC. Conservatives value more than just tax relief. Reforms that promise to streamline government programs and promote fiscal responsibility are more likely to garner support from Republicans. Left-liberals should take these values seriously if they want to see meaningful reform of the CTC.
Steven Teles has written about the problem of complexity – what he calls America’s kludgeocracy – as overlapping programs, often working at cross-purposes, are introduced haphazardly over the years. It has become increasing hard for parents to navigate the plethora of government policies and programs aimed at strengthening families. One important step advocates of a refundable CTC can take is to push for rationalization of this system as it manifests itself in child-related tax/transfer benefits.
Representative Paul Ryan recognized this issue in his proposal to consolidate a number of means-tested programs into a single block grant to states to spend as they see fit. While consolidation is a good goal, there is no promise that the vertical consolidation that Ryan proposes will result in a simpler, more effective system for families or savings for taxpayers. There is no reason to believe that state governments are any less dysfunctional than the federal government.
Instead, left-liberals working with reform conservatives should aim for fiscally responsible pro-family horizontal consolidation of current tax-transfer programs aimed at children. Shifting the conversation to revenue/spending neutral simplification would lower the stakes and push it in a more technocratic, less morally charged direction.
Depending on their income, family structure, and childcare situation, parents may be eligible for the head of household filer status, the dependent exemption, the child tax credit, the earned income tax credit, the child and dependent care tax credit, or the supplemental nutritional assistance program (SNAP). This alphabet soup is enough to confuse any parent (including the author who wrote his dissertation on child tax credits but still needed helping filling out a W-4 form after the birth of his daughter).
Elaine Maag of the Urban-Brookings Tax Policy Center recently estimated that these child-related tax benefits amounted to $171 billion in 2013. If we include SNAP benefits for children then the total climbs to more than $200 billion in child-related benefits across six different programs. Complexity, not cost, is the problem. This system is, inefficient, ineffective, and unfair to families. It penalizes work and marriage while doing little to tackle child poverty.
The Canadian experience of the 1990s offers an attractive model for reform. Their goal was to consolidate portions of means-tested programs together with various child-related tax and transfer policies into a single refundable child tax credit. In 1992, the Progressive Conservatives introduced the refundable Child Tax Benefit – rationalizing a fragmented system, reducing penalties on work and marriage, and cutting child poverty at the same time. Left-leaning anti-poverty groups fought the reforms tooth and nail because they would not increase benefits for those on social assistance. If they had gotten their way, the reform would have fallen apart. In retrospect, it was clearly a good thing they lost the battle. The Progressive Conservative reforms provided the foundation for subsequent expansions the CTB in ways that would not have occurred otherwise.
Left-liberal anti-poverty advocates should work with reform conservatives to craft a bipartisan policy that similarly consolidates various child-related benefits into one refundable child tax credit. Importantly, this reform should not be aimed at raising total benefits for the poorest families. Doing so would raise red flags among conservatives that the reform is really just a Trojan horse for the kind of redistribution they oppose. Simplifying child-related benefits for families is a worthy goal in and of itself. Robert VerBruggen proposes one such reform here. My own proposal is here. Comparative and historical sociologists have unique insights into how proposals become policy. It’s about time we start putting this knowledge to good use.
Josh McCabe is the Freedom Project Postdoctoral Fellow at Wellesley College, where his current research project looks at the politics of child-related tax credits in the United States, Canada, and United Kingdom. Follow him on Twitter @JoshuaTMcCabe.
