Tax credit nation: Politicians are casting new spending as 'tax cuts,' hiding their true cost
The HillJan 11
US Lawmakers Propose $78B Child, Business Tax Credit Bill
The Facts
Sen. Ron Wyden (D-Ore.) and Rep. Jason Smith (R-Mo.) have unveiled a bipartisan tax bill that would issue $78B in tax breaks ahead of the upcoming tax-filing season — retroactively reversing some business-tax rules implemented under GOP leadership in 2017 and expanding the child tax credit.
This package proposes reallocating funds from the pandemic-era employee retention tax credit to the child tax credit and the business tax benefits, which would last through 2025 and are each valued at $33B. It further includes tax relief for disaster survivors, tax credits for low-income housing development, and tax breaks for Taiwanese workers and businesses operating in the US.
The Spin
Establishment-critical narrative
All too often, American politicians have introduced bills to create or expand the so-called "refundable tax credits," which they have falsely marketed as tax cuts despite effectively representing new direct expenditure because checks exceed taxes paid. As the national debt has already toppled $34B, the US should rein in public spending to reduce the burden on taxpayers instead of expanding federal benefits.
Pro-establishment narrative
Though the US has been in a precarious fiscal situation, adding up to $100B to the budget deficit to reduce poverty and boost the economy makes perfect economic sense. Child poverty costs the US economy over $1T, as it slashes productivity and increases both health care costs and crime, while the gross domestic product could fall by up to $325B per year without the proposed business tax deductions.
Nerd narrative
There is a 75% chance that the GOP will control the Senate after the 2024 election, according to the Metaculus prediction community.