D.C. Download: Nevada delegation open (with reservations) on child tax credit deal
Greetings from D.C., where we finally had snow for the first time in over 700 days. To put that in perspective, Congress passed tax legislation more recently than our last snowstorm — and we all know how rare that is.
This week, I’m looking at a recently released tax framework for a bipartisan deal centered around the revival of the child tax credit. Let’s get into it.
The News of the Week: The tax deal
Remember the child tax credit? If you’re a working parent with a household income of less than $150,000, surely you do. For six months in 2021, the government sent a monthly check of $250 to $300 per child to more than 330,000 Nevada families.
The policy, created via the 2021 American Rescue Plan, expanded the child tax credit from $2,000 to $3,000 annually for children between the ages of 6 and 17, and from $2,000 to $3,600 for children younger than 6. Critically, the Department of the Treasury sent out these checks on a monthly basis, rather than allowing families to claim the funds once per year when filing their taxes. The credit was fully refundable — allowing the lowest-income filers to claim the credit for the first time even if the credit was bigger than their tax bill. Single filers earning less than $75,000, heads of household earning less than $112,500 and joint filers under $150,000 in annual income were eligible.
The expanded child tax credit proved enormously successful. In 2021, it reduced child poverty rates in Nevada by 39 percent, according to the Center on Poverty and Social Policy at Columbia University.
But after six months, the expanded credit lapsed amid a lack of Republican buy-in; subsequently, child poverty in the U.S. climbed from a record low of 5.2 percent in 2021 to 12.4 percent in 2022. In Nevada, the supplemental poverty rate increased from 9.3 percent to 10.5 percent.
Enter the bipartisan tax deal.
Negotiated between Senate Finance Chair Ron Wyden (D-OR) and House Ways & Means Chair Jason Smith (R-MO), the $78 billion deal is almost fully offset by revising pandemic-era tax credits for employers, according to the Joint Committee on Taxation.
After the expanded credit lapsed, the child tax credit reverted to an annual credit of $2,000 per child. But only $1,600 of the $2,000 is refundable — meaning the lowest-income families were not earning the full credit.
The Wyden-Smith proposal would expand the child tax credit — though not to its 2021 level — by increasing the maximum credit per child from $1,600 to $2,000 by 2025, with adjustments for inflation, and funding the credit for three years — the 2023, 2024 and 2025 tax years. That means parents this year could use last year’s earnings if it results in them claiming a bigger credit. Changes to the phase-in structure now allow eligible families to claim the full credit for each child.
Its biggest impact would be on low-income families unable to access the full credit because it exceeded their tax bill. The proposed credit leaves out a few of the 2021 provisions — namely, sending the checks out monthly instead of serving as an annual tax break. The total credit amount per child is still not as high.
The deal pairs the expanded child tax credit, a Democratic priority, with the extension of three business deductions for research and development from the 2017 Trump tax cuts that had expired, allowing businesses to claim the deduction immediately rather than over a five-year amortization period. It would also be retroactive for 2022 and 2023.
Finally, the deal contains an expansion of the Low Income Housing Tax Credit (LIHTC), lowering the requirements to access the credit and increasing it 12.5 percent, giving affordable housing developers more federal funds to work with.
Some progressives have said the spending on the business tax breaks outweighs that of the child tax credit, and Democrats should ask for more. Meanwhile, some conservatives say the child tax credit portion is overly charitable and needs to be more closely pegged to work status — an argument made by the Wall Street Journal editorial board.
While Wyden and Smith negotiated the deal, the minority tax leaders in both chambers — Rep. Richie Neal (D-MA) and Sen. Mike Crapo (R-ID) — have not yet signed on, though they had positive things to say about it.
The deal presents an interesting political dilemma. Should members accept the deal now to get something they can deliver for their base, even if it’s not the full version? Or should they wait and try to get a fuller bite of the apple after the 2024 election, knowing that they risk their party losing control of a chamber?
The Nevada Angle
Members of the Nevada delegation I spoke with this week expressed optimism about the contours of the deal, with Democratic members willing to overlook reservations in favor of reviving the child tax credit extension.
Sen. Catherine Cortez Masto (D-NV), who sits on the Senate Finance Committee, said the child tax credit and the low-income housing tax credit are worth finding compromise on.
“I think we need to focus on a bipartisan support for it — which we have — and do what we can now to help families,” she said when asked if Democrats should wait until after the election to pursue tax policy.
Given that the deal covers three tax years and runs through 2025, the political calculus for both sides could be positive given that most of the Trump tax cuts expire that year, creating the need for a new tax package — all the more reason to pass a temporary fix until then, even if the provisions are suboptimal.
Rep. Steven Horsford (D-NV), a former member of the powerful Ways & Means Committee who’s made no secret that he wants to return to the panel if Democrats win the House in 2024, said there are two changes Neal and Democrats should push for. He wants to see the package include advanced refundability — the monthly payments — and expanded eligibility. But he said would approach the package “to try to get to yes,” saying even a compromised version would be helpful to families struggling with child care costs in his district.
“Anything that helps to lift children out of poverty and keep them out of poverty and keep their families out of poverty is a good thing,” he said.
While progressives have grumbled about the cost of the business portions relative to the child tax credit, the tax breaks are not universally unpopular on the left. Sen. Jacky Rosen (D-NV) said the business tax deductions would boost industries in Nevada, and that “it looks like there’s a lot of good things” in the package.
“Investing in research and development [is] very important in Nevada,” she said. “We have a lot of mining and high tech and all those things really happening in our state.”
Rep. Susie Lee (D-NV), a moderate, was the most bullish on the deal structure, saying in a statement that she looks forward to passing it “while continuing to push to further expand the child tax credit.”
Rep. Dina Titus (D-NV) was the most hesitant among the delegation members I spoke with, saying she wants to see the child tax credit expanded but that the deal “has a long way to go before it’s finished.”
Rep. Mark Amodei (R-NV), the delegation’s lone Republican, said he wants to better understand the deal and its negotiators to ensure it’s the will of Ways & Means Republicans rather than just one or two members. The committee had a competitive race for chairman.
While smaller than the 2021 child tax credit, the Center for Budget and Policy Priorities (CBPP) estimates 163,000 children in Nevada would benefit under the deal. In particular, CBPP — a progressive think tank — estimates it would benefit 93,000 Latino children in the state.
The tax deal has some powerful backers — in addition to Wyden and Smith, Senate Majority Leader Chuck Schumer (D-NY) has said he approves of it, and House tax writers are moving quickly, hosting a Ways & Means markup on Friday.
But a few factors could slow it down. Filing season starts Jan. 29, creating a deadline for Congress if it wants the retroactive provisions to kick in. And tax bills typically ride along on other legislative vehicles, but this Congress is notorious for having a relatively empty station.
There’s certainly momentum for the deal, but, to put it in Vegas terms, the House (and the Senate) don’t seem to win very often when it comes to major legislation.
Around the Capitol
🏛️Let’s Get CRazy — Both chambers of Congress passed another continuing resolution, or CR, to keep the government funded through early March, once again averting a government shutdown. All six members of the Nevada delegation voted to keep the government open; in the House, over 100 Republicans and two Democrats voted against the resolution.
♠️Titus’ Trump card — Titus went semi-viral on Twitter for a polite but precise takedown — her typical style — of Republican accusations against Hunter Biden in a Homeland Security Committee hearing. Calling out Trump’s business ties to foreign powers, she urged Republicans to “be a little careful about how we throw out those accusations. People in glass houses — you know the saying.”
Titus will continue to be in the mix as the Homeland Security Committee proceeds with impeachment hearings against Homeland Security Secretary Alejandro Mayorkas.
🎒Tutor-to-teacher pipeline — Lee introduced a bipartisan bill with Rep. Anthony D’Esposito (R-NY) that would create a $500 million grant program for school districts and organizations expanding access to tutoring in underserved communities. It would also aim to put more student-teacher candidates in tutoring positions and make tutors eligible for student loan forgiveness. The bill was endorsed by several education organizations, including the Clark County School District.
🤝The federal Northern Nevada summit — Rosen convened UNR President Brian Sandoval and Secretary of Commerce Gina Raimondo on Thursday in her office to talk all things Tech Hub, and get the former governor face time with a member of the Cabinet to discuss Northern Nevada priorities. The three talked about the lithium industry, UNR’s wildfire research and improving broadband permitting in the region.
Notable and Quotable:
“I gotta figure out where the hell to go.”
— Rep. Mark Amodei (R-NV), on his caucus plans
Vote of the Week
H.Res.957: Denouncing the Biden administration’s open-borders policies, condemning the national security and public safety crisis along the southwest border, and urging President Biden to end his administration’s open-borders policies.
The bill is a messaging vessel brought to the floor by House Republicans to bolster their border arguments and hammer Democrats who vote against it. Ultimately, the resolution passed 225-187, with Lee joining 14 Democrats, almost all in competitive races and purple districts, bucking their party to vote ‘yes’ along with all Republicans.
None this week.
If you have a new position in Nevada politics, reach out and let me know!