Senators Marco Rubio and Mike Lee have signaled their commitment to introducing an amendment to the Senate’s tax reform bill that would be expanding the child tax credits to cover even more American families.
A spokesperson for Lee’s office said that, while the language of the final amendment is still being written, the senator expects that the amendment will be voted on prior to a final vote on the tax bill, which is expected by some to be done by Friday.
The Rubio-Lee amendment as it was announced on Wednesday would trade a slight increase in the proposed corporate tax rate for an expansion of the child tax credit, which is intended to reduce the tax burden on the low-income families.
“Our amendment would make a small change in this bill, but a huge difference in the lives of working families,” Lee had 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 most current form, the Senate’s tax bill would be expanding 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 is largely applied to the families who were paying income taxes, 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 a 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, which is 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 the 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, who is a senior analyst at the Tax Foundation said, “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.”
“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 had said.