The Reformicon Child Tax Credit Is Not Refundable

The Reformicon tax plan is super unfair. It purports to be interested in compensating parents for the future payroll taxes of their grown children, but then it doesn't do that. Instead, it gives rich parents way more money than poor parents even though that doesn't make any sense if the goal is to pay parents for their childrens' payroll taxes. Here is the difference in payments two hypothetical set of two-child families would recieve under the plan over the course of their kids' childhoods:

In a recent piece, Elizabeth Stoker Bruenig makes this basic point about how unfairly these benefits are structured:

Since the poorest often file no tax returns at all, a tax credit could amount to literally nothing for them. Those who do file tax returns but make very little are consequently awarded very little in non-refundable, credit-based programs. Yet the children of poor women cost no less than the children of women who would receive meatier benefits from a tax-based system, and the regularity of monthly payments is much more amenable to the actual struggle of child-rearing than a lump sum each April.

In response to this point, Pascal-Emmanuel Gobry wrote that Bruenig "mischaracterized" the Reformicon plan, saying the followig:

It is indeed true that most poor households file no tax returns at all, which is why the child tax credit advanced by Sen. Lee and reformocon writers before him is refundable against the payroll tax, which is paid by all working Americans including those who do not pay income tax, as well as the income tax.

Gobry is wrong to say that Bruenig has misrepresented the plan. In fact, Gobry is the one guilty of mischaracterization here.
 
Gobry represents this text as a refutation of Bruenig, but everything she said about the credit is correct. Bruenig said that if you don't file income taxes (i.e. you literally don't fill out the forms, which many low-income folks don't do), you won't get anything back. That is true. Bruenig then said that if your tax liability is low, the non-refundability of the credit means that you won't get the full amount of it. That is also true. If your combined payroll and income taxes are too low, you won't get the full credit.
 
In fact, under the Reformicon plan, child benefit deprivation takes the form of a rather horrific sliding scale. The poorest will receive the least child benefits, the near-poor the next least, the lower middle class the next least, and so on until we hit the families with income high enough (and it will need to be pretty high incomes depending on the number of kids they have) to claim the entire value the multiple child tax credits and the personal exemption. Thus, the more market income you get, the more child benefits you get until you hit the phaseout. This is a very immoral way to structure child benefits and even inconsistent with the Reformicon's own arguments for providing child benefits (which make the case for equal benefits), but it is what it is.
 
When Gobry says that the $2,500 Child Tax Credit is "refundable" because it also applies to the payroll tax, he is being deceptive and mischaracterizing the plan. Words have meaning and in the context of tax policy debates, the word "refundable" does not mean that. A refundable credit is one that gives you the surplus of the difference between your tax liability and the amount of the credit back as a refund.
 
If you have $2,500 of the child tax credits remaining to use after income tax liability is wiped out and payroll tax liability of $500, then a non-refundable credit is one that gives you $500 to wipe out that tax liability and withholds the other $2,000 from you. A refundable credit, on the other hand, is one that gives you the $500 to wipe out that tax liability and then refunds the remaining $2,000 to you in cash. The Reformicon credit is clearly the former kind of credit and should be described that way. Otherwise, it confuses people into thinking that it isn't the kind of poor-family-depriving plan that it actually is. That is, it "mischaracterizes" the plan by ascribing to it a character ("refundable") that it doesn't actually have.

Comments