THE HOUSE WAYS AND MEANS COMMITTEE is trying to rush a new tax bill, preposterously titled, ‘The Tax Relief for American Families and Workers Act,’ through the House in record time—which should put the subject bill under heightened suspicion.
When the Heritage Foundation’s Richard Stern and Preston Brashers did just that, they were disappointed by what they learned. The bill, they say, is “disguising welfare expansion, corporate windfalls, and inflationary deficits, all at the expense of the middle class [and] includes weak work requirements, improper payments, and benefits for illegal aliens.” (Brackets added.) No wonder it’s being pushed to passage in ten days, a remarkably short timeframe.
Supposedly, there were middle-class tax cuts and pro-growth reforms, but alas, the bill promises “welfare expansions, corporate windfalls, and inflationary deficits.” What is dubbed ‘middle class tax relief’ is actually 91.5% an expansion of welfare benefits. In fact, the only thing that might benefit an individual taxpayer is a minor cost-of-living adjustment to the child tax credit—probably to $2,100 from $2,000 per child, for returns filed in 2025 and 2026 before sunsetting. And it doesn’t make what Stern and Brashers believe is an important change to the credit regarding work requirements. They’re right, too.
At present, households with over $2,500 of annual earned income get the ‘additional child credit’ at a rate of $15 for every $100 of earned income after the $2,500. Under the proposed change, the phase-in would rapidly accelerate, so a household with $10,000 in annual income claiming three children would receive a $3,375 credit instead of $1,125. It is a refundable credit, too, meaning that even if a household pays -0- in taxes, the government will refund the credit amount.
This is in addition to the earned income tax credit, also a refundable credit, a household may be entitled to, here, another $4,500. One might think that if a family has such a low household income, they ought to get the help, but this is on top of all the other welfare benefits they qualify for and receive through federal, state, and local programs, or charitable help for which they are not paying taxes.
There are studies in most cities that show what the equivalent in actual income is when households take advantage of the welfare programs, many of which are extremely robust and generous. In some cities, one might see a $90,000/yr. equivalent. And if a household doesn’t work enough to make $2,500/yr. in 2024, but did in 2023, there is a look-back provision which gives the household at least as much as last year. Working part-time, seasonally, or even every other year guarantees you that much income at taxpayers’ expense. Never mind possible fraud with these credits, which for the EITC ran rampant at 31.6%; for ACC at 15.8% for FY 2022.
Yet the absolute worst part of the bill is that these credits would go to illegal alien parents for alien children. No social security numbers are needed, just an identification number. (To put blame fairly, Trump’s inaptly-named Tax Cuts and Jobs Act had the same defect.)
Business provisions of the new bill, Stern and Brashers maintain, aren’t quite as bad as the individual ones, but they’re still pretty bad. They concede that extending expiring provisions in the 2017 reforms for research and development and short-lived capital investment expenses for 2024 and 2025 are sound policy. The Tax Cuts and Jobs Act allowed deductions in the year that such specified expenses accrued instead of requiring them to be expenses over years through depreciation or amortization. They point out, correctly, that this encourages investment.
A provision in the new bill would allow retroactive relief for expensing for 2022 and 2023 which does not encourage investment since one cannot retroactively make decisions to invest.
Stern and Brashers digested the findings of the Tax Foundation’s take on the new bill. A modeling analysis suggests there will be no impact on long-term economic growth nor on job creation. At best, it might provide some momentum for a pro-growth policy in 2025, but that’s it.
Furthermore, the Joint Committee on Taxation, which is the official congressional research entity for such matters, agrees: the business provisions wouldn’t have any significant impact on economic growth, even after “tens of billions” of “corporate windfall handouts.”
Finally, Stern and Brashers fault the $155 billion cost over 2024 and 2025, and “gimmicky” means of “paying for” these handouts:
“As with much “bipartisan” legislation, this one falls short on conservative principles. The bill has some small wins but unfortunately will redistribute wealth from hardworking, middle-class families to large, established corporations and to individuals who are barely engaged in work at all.”
No wonder they called the bill a “Trojan horse.”