Build Back Better Deserves Better
Sen. Joe Manchin of West Virginia has said that he wants to tie work requirements to the expanded Child Tax Credit (CTC).
At first glance, this will sound reasonable to some. In practice, a work requirement is unnecessarily punitive, paints everyone with a broad brush, adds more bureaucracy to the program and, importantly, would leave behind some of the most vulnerable children.
Today, one article after another reveals that billionaire net worth is growing by leaps and bounds and wealth continues to concentrate at the top. Just this week, a Federal Reserve survey revealed the top 10 percent own 89 percent of all stock. Also this week, a new study revealed billionaire wealth has grown by $2.1 trillion since March 2020.
President Biden proposed the Build Back Better agenda because he and other national leaders recognize the nation can and should do more to unrig the playing field and move the nation closer to the ideal of widespread opportunity and shared prosperity.
The proposed CTC expansion is part of that agenda. Already, a temporary CTC expansion enacted earlier this year is working as intended. The credit has lifted millions of children out of poverty. The monthly payments ($250 for each child age 6 and over, and $300 for each child under age 6) are helping low- to middle-income parents pay for their children’s basic needs, pay for child care, dig out of debt or just worry less about how to make ends meet. The credit benefits 84 percent of families with children but is most impactful for very poor and low-income families, who will receive a 35 percent income boost this year thanks to the credit.
Besides extending the CTC expansion, the Build Back Better agenda, as the president proposed, would require corporations to pay a higher tax rate and shut down a loophole that allows them to play offshore shell games to avoid U.S. taxes. Households earning more than $400,000 a year would be subject to a higher marginal tax rate on their income. The president proposed limiting the stepped-up basis loophole, which currently allows vast amounts of capital gains that have never been taxed to be exempt forever when a taxpayer passes assets onto heirs. And his proposal would end the rules that tax capital gains and stock dividends at lower rates than income from work.
These are just the tax provisions. More broadly, Build Back Better would provide community college for two years, provide an infusion of funding to address the child care crisis, fund universal Pre-K, provide 12 weeks of paid family leave, expand access to health care, address skyrocketing prescription drug costs, build more affordable housing, fund clean energy programs, and so much more.
But these transformative policy ideas have been diluted to appease Sen. Manchin and Sen. Kyrsten Sinema of Arizona, who are standing in the way because of something about so-called moderation and compromise. It’s worth noting that most of the public supports tax increases for the wealthy and corporations as well as increased investments. The plan already has been whittled down from its ambitious $6 trillion beginnings, but this apparently is not enough. Sen. Manchin, for example, has settled on an arbitrary $1.5 trillion but is leaving the messy work of meeting his demands to his congressional colleagues. The truth is that the vast majority of West Virginians and Arizonans (and everyone else) would benefit from the plan as the president proposed (as well as the plan passed by the House Ways and Means Committee).
The Institute on Taxation and Economic Policy has produced an analysis of how the bill’s tax changes would affect people nationally and in each state. The net result of all the tax changes for a specific taxpayer would depend on their individual circumstances, but ITEP found that overall taxes would go up for the richest 5 percent of Americans and down for everyone else.
Wealthy powerbrokers and their political allies, however, conveniently ignore these truths. Instead of focusing on how increased taxes and investments would broadly benefit the public, their language around the nation’s tax and budget policies devolves into dog whistles about deserving people v. undeserving people. Today, a small percent of children whose parents have no earned income are undeserving, tomorrow it will be another group. Almost always, those who “deserve” more already have the most.
Sen. Manchin, like many other lawmakers historically, worries about poor people receiving tax credits but shows no concern about rich people who do not work receiving tax breaks. Two former Democratic senators (Heidi Heitkamp and Max Baucus) were part of a special interest-driven effort to keep the stepped-up basis rule, which allows rich people to accumulate and pass on wealth tax-free. Lawmakers responded, taking this provision out of the Build Back Better Bill passed by the House Ways and Means Committee. This means we’ll continue to have enormous sums of dynastic wealth pass from generation to generation without ever being taxed, entrenching economic and racial inequality.
Over the decades, through legislation, regulation and judicial decisions, political leaders have built structural imbalances into our system that make it easier for rich people to grow their wealth than for low-income working people to climb the income ladder.
Research shows poor children have better outcomes if they receive the financial support they need to thrive. These children should not be used as a tool in a highly questionable arsenal of tactics to torpedo or diminish a transformative policy agenda that will move us closer to an economy that works better for all of us. Build Back Better deserves deeper questions than, “how can we spend less?”
