A major feature of the House Ways and Means Committee’s “tax bill” is an expansion of the child tax credit. This expansion was necessary to secure Democrats’ support for the corporate tax provisions in the bill, but the trade isn’t worth the cost.
The welfare-related child tax credit provisions aren’t a minor extension of the Tax Cuts and Jobs Act of 2017, but a massive departure from the status quo. Together, they move the country in the wrong direction on welfare policy after years of pro-family, pro-work progress.
The problems with the committee’s bill are many. It would increase welfare subsidies for single parents rather than further promoting and strengthening married, two-parent households. It would undermine rather than strengthen work requirements in welfare. It would increase, not reduce, fraud and excess benefits. It would provide more welfare to illegal immigrants.
Fundamentally, this bill accepts the tenets of President Joe Biden’s welfare agenda and, if it is not stopped this time, will need to be fixed when the rest of the provisions of the Tax Cuts and Jobs Act expire in 2025.
Far from a program that incentivizes work and family formation, the Ways and Means Committee’s bill, by expanding so-called refundable child tax credits, would simply expand the traditionally flawed welfare state.
The bill is based on the premise that more welfare money must be spent, primarily to subsidize single parents. Although the bill claims its aim is to provide “tax relief” to families with children, there is little “tax relief” in it for working families.
Instead, over 90% of the “family benefits” would be new cash welfare payments to families who pay no federal income taxes and little or no Social Security tax. Nearly all family benefits in the bill are overt cash welfare payments, not “tax relief.”
If passed, the bill would greatly expand the Additional Child Tax Credit, which is a simple cash welfare benefit program that has nothing to do with taxes. The current ACTC program has a weak work requirement riddled with extensive fraud. The committee bill would deliberately weaken this already weak work requirement.
Under current law, parents ostensibly are required to work to obtain ACTC benefits; benefits increase as earnings increase. However, this work requirement is highly porous and readily evaded through fraud.
In the current program, only 55% of benefits for single parents appear to go to eligible parents. Often, the custodial single parent will transfer eligibility for the benefit and the work requirement to relatives or other adults who don’t even live with the child.
The transferred benefit then is shared with the nonworking single parent. A work requirement that easily can be “transferred” to others is not a serious requirement.
Regrettably, this bill takes an already porous, fraud-filled work requirement and would weaken it further by insisting that recipients need only work every other year instead of every year.
Another alarming aspect of the bill is its expansion of an existing problem: welfare payments targeted to illegal immigrants.
Under current law, illegal immigrants who have children born in the U.S. (and many do) may claim cash welfare benefits from the ACTC. The committee bill would expand these cash welfare payments for millions of current illegal aliens and millions more who enter the country in the future—exacerbating a design flaw in the program.
The bill would substantially increase a means-tested welfare system that already costs over $1.2 trillion per year. Benefits in that system are already quite high.
Under current law, for example, in 2023, a single mother with two school-age children earning $15,000 per year also would receive $15,476 in welfare benefits from the Earned Income Tax Credit, the Additional Child Tax Credit, and the food stamps and school nutrition programs. In addition, this family would be eligible for Medicaid coverage worth, on average, around $14,950.
Altogether, these standard welfare benefits would triple the parent’s income; total post-tax resources would come to around $44,300. In addition, some (but not all) such families would receive Section 8 or other public housing aid worth around $10,000, bringing total potential resources to around $54,300.
The Ways and Means Committee’s bill would add more cash welfare on top of this benefit pile. In this example, the single parent would receive an added $1,875 in cash grants under the bill. This would bring the family’s total income to $46,184, or $56,184 if the family received housing aid.
The problem isn’t simply the immediate benefit increase; rather, by camouflaging new welfare benefits as “tax relief” and failing to even hint at the welfare already received by its beneficiaries, the bill lays fertile ground for even more welfare expansions.
A prominent goal of the Left is to remove work requirements from welfare and to restore the work-free, unconditional cash aid that existed before welfare reform.
Biden sought to advance this goal by creating a new “child allowance” that removed work requirements from the ACTC and greatly increased benefits. The Ways and Means Committee’s bill goes at least halfway toward fulfilling the president’s aims.
The bill embraces the premises and goals of the Biden plan to greatly increase cash welfare payments (predominantly for single parents) while weakening or removing work requirements. The bill sets the ground for a future “compromise” that would fully enact the Biden “child allowance” program.
From this perspective, the committee’s bill represents an enormous political and policy victory for Biden.
The welfare portion of the bill directly and explicitly repudiates the principles of successful welfare reform, which have governed the welfare system since the mid-1990s.
Welfare reform instituted in 1996 by a Republican-led Congress, with broad bipartisan support, established work requirements and time limits in the dominant welfare program: Aid to Families with Dependent Children, known as AFDC. Over 90% of recipients in this program were single-parent families.
A principal aim of welfare reform was to halt the rapid and alarming disintegration of marriage. Family collapse had been steadily advancing for decades. Work requirements reduced the utility of being a single parent on welfare and raised the relative utility of being married to a working husband.
As a result, the rapid decline in married families halted; non-marital teen births and abortions fell rapidly. Overall, there have been 10 million fewer abortions due to the changes initiated and promoted by welfare reform.
Yet, the Ways and Means Committee’s bill would increase cash welfare subsidies to single parents relative to married families and weaken work requirements that predominantly affect single parents. It threatens family formation.
Overall, the welfare portion of the bill would overturn the principles that conservatives have stood for in welfare and family policy for three decades.
If enacted into law, it would be a major victory for the Left and a heavy blow for American families. It also would be a big step backward on the road to reform of America’s broken welfare system.
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