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CT families could see some relief as bill with child tax credit passes

The U.S. Capitol in Washington, D.C.
Elizabeth Hamilton
/
CT Mirror
The U.S. Capitol in Washington, D.C.

Thousands of low-income families as well as companies in Connecticut could see tax breaks if both chambers of Congress approve a bipartisan bill providing some relief over the next few years.

The U.S. House took the first step on Wednesday night, surpassing the two-thirds majority needed to pass “The Tax Relief for American Families and Workers Act of 2024” in a bipartisan vote, 357-70.

The legislation — negotiated by U.S. Sen. Ron Wyden, D-Ore., and U.S. Rep. Jason Smith, R-Mo. — includes restoring a few Trump-era tax deductions for businesses in exchange for a modest boost to the federal child tax credit, though it does not go as far as the 2021 expansion.

The $78 billion tax bill has encountered resistance on both sides of the aisle in recent weeks: Democrats wanted the full expansion of the enhanced child tax credit, while some conservatives raised concerns over which families would benefit from it.

U.S. Rep. Rosa DeLauro, D-5th District, who has been a years-long advocate of the child tax credit, has been an outspoken critic of the legislation, arguing that it leans too heavily in favor of providing relief to corporations over low-income families.

But the bill got a major boost last week when the tax-writing House Ways and Means Committeeoverwhelmingly approved it, which included Rep. John Larson, D-1st District. And it secured the approval of House Speaker Mike Johnson, R-La., who called it “important bipartisan legislation to revive conservative pro-growth tax reform” that “also ends a wasteful COVID-era program.”

On Wednesday, DeLauro voted against the legislation, while the rest of Connecticut’s congressional delegation backed it, including Larson, U.S. Rep. Joe Courtney, D-2nd District; U.S. Rep. Jim Himes, D-4th District; and U.S. Rep. Jahana Hayes, D-5th District.

Connecticut lawmakers like Courtney argued that local businesses like Westminster Tool, a manufacturing company in Plainfield, would benefit from measures in the bill, particularly from the research and development tax breaks to help with innovation and job growth.

“This is a pro-growth measure which will allow companies like Westminster Tool to get back on track in terms of innovation, which is so important for us to keep ahead of our global competitors, and again create good, skilled jobs,” Courtney said from the House floor on Tuesday, prior to the bill’s passage.

But others like DeLauro have fiercely pushed back that the bill “lacks equity.” She wants any federal bill to have the same enhancement to the child tax credit that was enacted in 2021 under the American Rescue Plan, which expired at the end of that year.

During that period of time, several million children were lifted out of poverty. And in Connecticut, 583,000 children qualified for getting the payments in December 2021, according to the U.S. Treasury.

DeLauro cited an example of businesses getting the research and development tax credit retroactively to 2022, while noting that families who want to use previous annual earnings to get a larger tax credit will not be able to take advantage of that until the 2024 tax year.

“I’m opposed to this bill in its current form,” DeLauro said in a recent interview. “Corporations get everything they asked for, and children got pennies.”

“Let us be clear: this is a reversal of the largest middle-class tax cut in history,” she said on the House floor before Wednesday’s vote.

While a much smaller expansion, the bill would help one in five children under age 17 as well as lift 400,000 children out of poverty, according to an analysis from the Center on Budget and Policy Priorities.

That same report estimated that 16 million children in low-income families would benefit in the first year if the bill is enacted. That includes families that currently do not qualify for the full tax credit or do not get one at all.

In Connecticut, that would translate to more help for around 119,000 children. About half of those children who would receive a boost are Latino, and more than three quarters are children of color.

“When the proposal is fully in effect in 2025, it would lift some half a million or more children above the poverty line and make about 5 million more less poor,” the CBPP analysis reads.

Under the federal proposal, families would get a boost for the next three tax years. The legislation seeks to provide more help to families with lower incomes and multiple children, though those who make less than $2,500 a year will not be eligible. The highest earners would likely not see much of a difference in what they already receive.

The bill would raise the refundable portion of the credit from $1,600 to $1,800, increasing by $100 a year until the 2025 tax year, as well as adjust it based on the rate of inflation. It would also allow low-income families to receive more for each child, instead of getting the same amount as someone with one child. And if families do not currently earn enough to qualify, they could use the prior year’s earnings to get the credit.

The current federal tax credit is back to $2,000 per child under age 17, though it is no longer fully refundable or given out as monthly payments. And the full credit is not available for some families because they make too little and do not owe income tax. The people not receiving the entire benefit are disproportionately families of color.

Aside from the child tax credit, the legislation would restore a few Trump-era tax deductions for businesses from 2017. One of those would allow companies to get immediate tax deductions for domestic research and development instead of deducting it over the course of five years.

Lawmakers secured a number of other priorities, including disaster relief for certain areas, an increase in tax credits for states to encourage affordable housing projects, and a tax treaty with Taiwan. They are seeking to pay for the new provisions by eliminating a pandemic-era employee retention tax credit that has been criticized for being rampant in fraud.

While many House Democrats ultimately supported the bill, including several from Connecticut, they wanted it to provide much more relief for families. And many of them cited DeLauro’s long advocacy on the child tax credit.

Democrats passed an expansion of the child tax credit through the American Rescue Plan in 2021, but it expired at the end of that year. That enhancement increased the rebate up to $3,600 per child under age 6 and $3,000 per child age 6 to 18.

Those who qualified for the full amount were working couples who made up to $150,000 or single-parent families earning up to $112,500. The 2021 law temporarily changed it so that families got monthly installments instead of receiving it all at once when filing taxes.

Connecticut was also one of a number of states that offered its own assistance to low- and middle-income families. In 2022, the state provided a one-time rebate of $250 per child. More than 70% of eligible households claimed the tax credit.

The legislation now heads to the U.S. Senate and could still face a tough path if enough members object. Democrats narrowly control the chamber, but the bill needs support from both parties to pass.

Some Republicans, like U.S. Sen. Thom Tillis, R-N.C., have said they oppose the legislation, also citing concerns with the way the child tax credit is structured.

U.S. Sen. Chris Murphy, D-Conn., has not yet indicated how he would vote on the tax bill but said he would consult DeLauro on the child tax credit. U.S. Sen. Richard Blumenthal, D-Conn., has said he would support such legislation.

If the bill fully clears Congress, President Joe Biden has indicated he will sign it into law.

This story was originally published by the Connecticut Mirror.

Lisa Hagen is CT Public and CT Mirror’s shared Federal Policy Reporter. Based in Washington, D.C., she focuses on the impact of federal policy in Connecticut and covers the state’s congressional delegation. Lisa previously covered national politics and campaigns for U.S. News & World Report, The Hill and National Journal’s Hotline.

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