A Plan to Save the American Family
Josh Hawley is not messing around.
I’ve been warning conservatives for quite some time now: Biden’s child allowance is a political game changer. Starting later this year, instead of a child tax credit, families will begin receiving $300/month per kid under the age of six, and $250/month per kid between ages six and seventeen. This monthly benefit will prove to be tremendously popular, and although it expires in 2022, it’s a safe bet that it will be extended, re-extended, re-re-extended, and then finally made permanent within our lifetimes. Monthly payments to families are here to stay. This is the new normal.
Republicans have a choice: they can live within political reality and try to compete with the Democrats by offering something similar that also reforms welfare and better incentivizes work and family formation, or they can pine for the olden days of small government fiscal conservatism, which are, for better or worse, no more.
As I see it, Republicans have three viable policy options to counter Biden’s child allowance: the Lee-Rubio child tax credit expansion, the Romney child allowance, and the Hawley Parent Tax Credit.
1.) The Lee-Rubio Child Tax Credit Expansion
For years, Senators Mike Lee (R-Utah) and Marco Rubio (R-Florida) have been fierce advocates for child tax credit (CTC) expansion. Their latest proposal would increase the CTC from $2,000 per child to $4,500 per child for kids under the age of six, and $3,500 per child for kids between ages six and seventeen.
The proposal includes an aggressive work requirement, as eligibility for the refundable portion of the credit is tied to income. Starting from the first dollar earned, families would receive 15.3 cents for each dollar earned up to the full amount of the CTC. While that will result in a CTC below the maximum amount for many low-income families, the expansion appears to be beneficial over the current status quo for all working families regardless of income.
It’s important to note that a very similar version of this CTC expansion received a vote as an amendment to replace Biden’s child allowance in the $1.9 trillion "American Rescue Plan” passed in March. Every single Republican Senator voted in favor of it. The support is there to get this done.
2.) The Romney Child Allowance
In February, Sen. Mitt Romney (R-Utah) released a budget-neutral proposal that revamps the CTC system and the welfare system, replacing them with a child allowance that in many ways functions similar to the Biden child allowance. Romney’s proposal is more robust: parents would receive $350/month for children under the age of six, starting four months before the child is born, and $250/month for children between the ages of six and seventeen. There is a cap: the monthly payment would never exceed $1,250/month.
Romney’s plan also reforms the Earned Income Tax Credit (EITC) — single filers would receive a $1,000 credit, married filers would receive a $2,000 credit. Meanwhile, the Temporary Assistance for Needy Families (TANF) program would be phased out, and the state and local tax deduction (SALT) would be permanently eliminated.
The biggest contrast between the Romney plan and the Lee-Rubio plan is the work requirement. Romney’s proposal doesn’t have one. A parent who made $2,000 in a year would receive the same benefit as a parent who made $200,000 in a year. Lee and Rubio have both argued that incentivizing work is a must-have in any change to the CTC. They’re not alone in this view — this is fairly representative of what the Republican caucus believes. Here was my argument in favor of the Romney plan in February:
I think those supporting the Romney plan would express skepticism that it disincentivizes work for primary income earners. The capped amount is $15,000 annually, which is hardly enough for a family to subsist on and support 4+ children. It is possible that it might disincentivize work for secondary income earners stuck in the “two income trap.” Will a married mother of four continue to work at McDonalds as a side hustle if she’s bringing in $10-$12,000 a year via this stipend? Maybe not. But this is already true for many poor folks under our existing welfare regime, which Romney’s plan would upend. By getting rid of some of these welfare cliffs — and long-term, there are plenty more we would need to eliminate — families would always be incentivized to earn the next dollar.
3.) The Hawley Parent Tax Credit
Both of the above proposals are good plans that would absolutely help working families. Passing either of them would be a big win for the GOP. But what if we wanted to really swing for the fences?
On Monday, Sen. Josh Hawley (R-Missouri) introduced a plan to create a Parent Tax Credit (PTC). The PTC is beautiful in its simplicity: if you’re a single parent with a child under the age of 13, you get a $6,000 fully refundable tax credit. If you’re married parents, you get $12,000. This would be paid directly to families by the IRS in monthly installments of $500 or $1,000. The PTC would exist separately from the CTC, meaning it wouldn’t cancel the existing benefit. The PTC eligibility requirement is quite modest — a household must report earnings of at least $7,540 the previous tax year, the equivalent of 20 hours per week of work at the federal minimum wage.
I am not exaggerating when I say this might be the most pro-family, pro-marriage, pro-life, pro-adoption, pro-work, pro-everything-that-conservatives-love economic proposal offered by a Republican Senator in recent memory. If conservatives are serious about fixing our declining marriage and birth rates, or even in lessening the overall tax burden on American families, they’ll seriously consider supporting Hawley’s PTC.
Let’s start with the obvious: Hawley explicitly wrote a marriage bonus into his proposal, and it is significant enough to dramatically affect behavior. Unmarried cohabitants with young children will have to ask themselves: is avoiding the altar worth missing out on an extra $6,000 a year? Of course not. And will married parents with young children be as quick to divorce, or will there be an added incentive for them to work out their problems at counseling? Money talks.
What about creating a culture of life? Thousands of women seek abortion every year out of concern over their ability to financially support a child. If they learned they had an economic lifeline, might they reconsider? And there’s no question the PTC will incentivize adoption, which is prohibitively expensive for many families. According to one figure, the average cost of adoption is between $50,000-$60,000 in the United States.
While Hawley’s bill includes no advantage for having multiple children, it is implicitly natalist. Not only does it create a strong incentive for parents to have their first child, but it will encourage parents to lengthen the total time period of having children under the age of 13 in their household. Parents with only a ten-year-old-going-on-eleven might decide to try to bring home a brother or a sister, recognizing that a newborn could be worth an extra $132,000 in tax benefits!
Also, let’s not forget the politics of the moment. Hawley’s proposal offers an all-inclusive cash benefit for parents at a time when Democrats are trying to pass a government takeover of childcare. Rather than subsidize government-run childcare facilities, why not send that money directly to parents so they can make their own childcare decisions?
In the months ahead, Republicans will need to rally around one of these proposals. The answer to the Democrats’ pro-family initiatives can’t be to simply do nothing. That would be a recipe for an electoral disaster with the GOP’s most important constituency: working families. Hawley’s plan is ambitious, yes, and perhaps even expensive, but it would also be incredibly effective, addressing many of our societal problems while also solving the GOP’s political problem. Certainly, at the very least, the Parent Tax Credit deserves a closer examination by Republican policymakers.