If you’re a progressive, the design and implementation of the new Child Tax Credit should worry you
The American Rescue Plan included a fully refundable child tax credit. The credit provides $3,600 per year for children under 6, and $3,000 per year for children between 6 and 17. The credit is paid out monthly, and slowly phases out for single parents who earn more than $112,500 and married couples earning more than $150,000.
This legislation marks a sea change in government policy towards poor children. For years, the poorest children have been largely excluded from income support by eligibility rules that made assistance available primarily to families with labor market income. The new tax credit, in contrast, is unconditional, and with full participation, the new tax credit would sharply reduce deep poverty among children.
Yet the legislation is seriously flawed in its design and implementation has been problematic. The upshot is that many of the poorest children – the children most in need of assistance – will not benefit from what should be a revolutionary new policy.
There are two design flaws, both of which have been emphasized by Matt Bruenig of the People’s Policy Project (e.g., here, here, and here). The first is that many of the poorest families – the families most in need of financial assistance – do not file tax returns, and hence will not automatically get checks. This problem could have been ameliorated in the implementation phase, but the IRS has so far failed to make it easy for eligible non-filers to enroll.
The second problem is that, due to the combination of means-testing and payment in advance (rather than in arrears), many families will be subject to unexpected clawbacks at the end of the year.
What is troubling about this is that it was completely unnecessary. Poverty analysts have been flagging these issues to policymakers for years, and there were relatively straightforward design choices that could have largely avoided these problems.
Perhaps these problems will be fixed when the legislation is reauthorized, or simply through improved implementation by the IRS. I hope so. But the underlying inability of our political system to make sound policy choices and to implement them competently is an ongoing problem that progressives need to take much more seriously. The fact is that implementing a child allowance that includes the poorest families is *much* easier to do than most of the other items on the progressive agenda, which includes daunting challenges such as decarbonization policy and health care reform.
My (speculative) view is that some of the current legislative dysfunction is due to the polarized state of our politics, and if (somehow) the Republican party moderates and our democracy survives, the quality of policymaking will at least modestly improve. But part of the problem is that many progressive voters, activists, and even some policymakers do not take seriously how difficult it is for the government to solve complex problems; they believe that the government can solve problems if only leaders are well-intentioned.
This is a point that classical liberals emphasize. They are partly right about the diagnosis, but not in their proposed solution, which is to shrink the government rather than working to improve it.
Preach!
I’ve been complaining about this since the details dropped. The clawbacks for the filers I am really worried about.
Between this, student loans, and now the evictions, things are about to get dire.
“This is a point that classical liberals emphasize. They are partly right about the diagnosis, but not in their proposed solution, which is to shrink the government rather than working to improve it.”
As one of those classical liberals my reaction at this point is not to insist that government must shrink.
OK, actually, I do say that. But not for this reason – I think a world with less government than we have would be a better one is my reason.
What I do say for this specific reason is that government should restrict the problems it tries to solve. By preference to those that both must be solved and also which only government can solve. And if not that then at least to those which government is competent to solve. Something which I’d insist is rather less government than we currently have.
Where we might actually have a meeting of minds is that yes, government can be inept at complex things. So, if there is going to be government action then make it simple. Say, climate change. There are a lot of detailed plans out there to do this, insist upon that, manage the other, plan yet more. Giving government just more ways to screw up. Which is one reason I prefer the carbon tax. It’s simpler – this government is more likely to be able to do it without screwing up.
Tim:
Hi, it has been a while since I have seen you. I am happy you are around and have avoided the Covid-19 plague. Be safe
If we leave things to be resolved by other interests, the things have a tendency to go unresolved. Hence the gov. steps in and attempts to level the playing field so those who are struggling have some type of chance. As imperfect as government interference is, it is still a far better step than waiting for the market place to resolve the issue.
You have not really suggested anything as a solution, so I am rambling around just as you are.
Looks like the IRS has done something for the non filers. I question how many non-filers know about it though.
Child Tax Credit Non-filer Sign-up Tool
https://www.irs.gov/credits-deductions/child-tax-credit-non-filer-sign-up-tool
Just to be clear, I strongly support expanding the child tax credit, and would have voted for it warts and all. It’s clearly an improvement over the status quo, and that’s my main test for supporting/opposing legislation. (Sure, there are other factors that sometimes merit consideration.) And in my view the challenge is to persuade progressives to take policy design more seriously, to adopt reforms to improve legislative and executive branch policymaking, not to persuade people to support limited government in general, which I believe is impossible. This is what makes me a progressive / non-classical liberal.
Democrats don’t really agree on how progressive they should be, so every new bill is a negotiation. Republicans just have to pull out the text the lobbyists have provided.
I suggest that is part of why the ACA never got repealed – a case where the lobbyists had not given them anything because there was not much about it they did not like. It was mostly written by a conservative think tank after all.