“Make the Child Tax Credit refundable against payroll taxes” — huh?

Last updated on: November 16, 2017 at 8:34 am by Jane the Actuary

“Make the Child Tax Credit refundable against payroll taxes” — huh? 2017-11-16T08:34:56-06:00 Jane the Actuary

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That’s what Marco Rubio has been pitching on Twitter:

Disrespectful & wrong to argue that lower income workers don’t pay taxes. #ChildTaxCredit should apply to payroll tax not just income tax

— Marco Rubio (@marcorubio) November 16, 2017

and he’s not the only one.

Here’s Ramesh Ponnuru in the National Review:

The argument for an enlarged credit also suggests that it should apply against both payroll and income taxes. A household with one child should get the full value of the credit so long as it generates $2,000 or more in federal revenues from all sources — even if its income-tax liability is below $2,000. It’s an important point because most households pay more in payroll taxes than in income taxes. Tax relief that does not include payroll-tax relief will reach a much smaller number of Americans.

And there’s a certain appeal in the concept — it transforms it functionally into something like the Earned Income Tax Credit.

But does that mean that we’re admitting that payroll taxes — you know, those taxes which fund Social Security and Medicare — are indeed taxes, and have no direct relationship to the benefits provided at retirement? Does that mean that we’re past the fiction that retirees have “earned” their benefits by paying into the system, and therefore no one can ever make any changes in the system?

I had already observed, when Clinton and Sanders were announcing their Social Security enhancement proposals, that we’d moved past that notion, at the upper end, as there is now consensus among progressives that the payroll cap should be removed in order for the wealthy to explicitly subsidize the poor and middle class’s Social Security increases. Creating the concept that child tax credits should be refundable based on the amount of FICA tax paid would further boost the notion that these are taxes, like any other.

And, just so you know, I’m totally fine with this, as long as the politicians pitching this, and even, if it happens, making this change, are honest about what it means, and stop trying to have it both ways: at tax, when that’s convenient rhetorically, and earned benefits, when that’s better for the argument one wants to make. But then, I also periodically flog The Jane Plan, in which we simply admit this, and provide a universal flat benefit paid for out of general revenues, and can never quite seem to get any big wigs to sign on, so what do I know?

Image: https://commons.wikimedia.org/wiki/File%3AUS_Navy_050114-N-3659B-050_he_Morale_Welfare_and_Recreation_Child_Development_Center_on_board_Naval_Support_Activity_Mid-South_in_Millington%2C_Tenn.%2C_provides_daycare_services.jpg; By U.S. Navy photo by Photographer’s Mate 3rd Class Joseph M. Buliavac [Public domain], via Wikimedia Commons

Because it’s an awesome thing, when you’re looking for public domain pictures, that everything from the federal government is public domain.

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Child Tax Credit

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