Rubio, Lee Expect Vote on Child Tax Credit Amendment

Senators still back trade of credit for families with slight corporate tax bump

Sens. Marco Rubio (R., Fla.) and Mike Lee (R., Utah) / Getty Images
December 1, 2017

Sens. Marco Rubio (R., Fla.) and Mike Lee (R., Utah) said Friday they are still committed to introducing an amendment to the Senate’s tax reform bill that would expand the child tax credit to cover more American families.

A spokesperson for Lee's office told the Free Beacon that, while the language of the final amendment is in flux, the senator still expects the amendment to be voted on prior to a final vote on the tax bill, which some expect on Friday.

The Rubio-Lee amendment as it was announced Wednesday would trade a slight increase in the proposed corporate tax rate for an expansion of the child tax credit, intended to reduce the tax burden on low-income families.

"Our amendment would make a small change in this bill, but a huge difference in the lives of working families," Lee said.

"We need pro-growth and pro-worker tax reform, and that's what this amendment aims to do by allowing working families to keep more of their own hard-earned money," Rubio said.

In its current form, the Senate's tax bill would expand the child tax credit, increasing the maximum payout from $1,000 to $2,000—a bump that is largely the result of Rubio and Lee's lobbying. But that increase would largely apply to families who pay income tax, which excludes many low-income, working-class families who only pay the payroll tax.

The Rubio-Lee amendment would raise the cap further, making the credit refundable up to payroll tax liability (15.3 percent). The increase would be offset by bumping the overall bill’s proposed corporate tax rate from 20 to 22 percent, still a substantial decline from the current rate of 38.9 percent.

The intention of the amendment would be not only to expand access to the CTC, but also to offset what Lee and others have labeled the "parent tax penalty." That refers to the requirement that parents pay into retirement programs—social security and Medicare—both for themselves and their children. Lee considers this double taxation, given that children will eventually themselves become workers contributing to these funds.

Scott Greenberg, a senior analyst at the Tax Foundation, noted that the payroll tax liability Rubio and Lee intend to counteract is already addressed for the poorest workers, specifically by the earned income tax credit.

"For households with children, the earned income tax credit phases in starting at dollar zero, and phases in at a rate equal or higher to the combined payroll tax rate. For low income families specifically, the problem being talked about by Rubio and Lee is in some ways already solved by the existing tax code because of earned income tax credit essentially counteracts the payroll tax  liability," Greenberg said.

But, he said, the child tax credit may still end up applying to middle class families making above the level at which the EITC applies, but below the level at which the CTC would phase out under Rubio-Lee.

"The question becomes, for a middle class family, because obviously the EITC is not widely available to everybody, it's only for the poorest workers. There, one could make a case for the double payroll tax liability, and therefore a case for the child tax credit. That I think is the more reasonable part of the case, but it's probably not for all families, maybe for some," he said.

The amendment has attracted its fair share of detractors. The same day that Lee and Rubio announced their amendment, the Wall Street Journal editorial board slammed it, attaching Rubio's name to Senate Minority Leader Chuck Schumer (D., N.Y.) and accusing him of trying "to blow up the Senate tax reform."

If passed, the Journal contended, Rubio-Lee would harm the bill's "most pro-growth plank"—the corporate rate cut—as well as introduce "a disincentive to work [that] we would have thought antithetical to conservative principles" by paying refunds to those who owe no federal tax.

The two senators said they are "open to alternative offsets that would preserve the 20% corporate rate, which we support as much as our Republican colleagues."

Bradford Wilcox, director of the National Marriage Project, and Samuel Hammond, an analyst at the Niskanen Center, backed Rubio-Lee as prioritizing working class families over big donors.

"[The amendment] would put markedly more money in the pockets of working-class families who play by the rules and are struggling to realize the American Dream," the two wrote.

The most recent version of the American Family Survey found that economic issues outpaced cultural ones among the concerns of Americans as to the state of families.

"The Rubio-Lee amendment clearly has a positive impact on families," Greenberg said. "Because it's expanding the parts of the tax code that help families [with children] most directly. I would clearly characterize it as a pro-family measure."