Missouri Congressman Jason Smith is hoping to inch his colleagues toward future bipartisan collaboration with a bill that increases the child tax credit and provides incentives for business research and development and low-income housing.
The Salem Republican joined forces with Oregon Democratic Sen. Ron Wyden to put forward the Tax Relief for American Families and Workers Act.
While Smith noted in an interview with St. Louis Public Radio that neither side of the political spectrum is completely happy with the bill, the agreement could provide guidance for federal lawmakers struggling to come up with legislation around immigration or aid to Ukraine or Israel.
“Sen. Wyden and myself politically are two totally different souls,” Smith said. “He's a progressive in Oregon, and I'm a conservative in Missouri. But we can find some common ground in this bill.”
Smith spoke with St. Louis Public Radio about the tax relief legislation, which could soon come to the House floor. (Questions and answers have been modified for clarity and length.)
Jason Rosenbaum: How does it change “refundability” with the child tax credit? Can you explain the concept of refundability to people who may not understand that type of tax jargon?
Jason Smith: The child tax credit, as it currently exists, is broken up into two directions. It's a $2,000-per-child tax credit. But the refundability aspect is roughly $1,700. And what that means is that families will receive at least $1,700 whether they still owe taxes or whether they don't owe taxes. They would still get that $1,700. This bill actually increases it $100 every year over the next three years. When the 2017 tax cuts were passed, it created the refundability at $1,400 indexed with inflation. And that's why it has gone up in the last seven years to $1,700.
Rosenbaum: So let's just say there's a taxpayer who has two children. They work at a gas station, but they don't earn enough to pay federal taxes. So under this bill, would they get $3,600?
Smith: Under the first year, they would get $3,600. And then the year after that it would be $3,800. Because it's a $100 increase over the next three years on the Child Tax Credit, starting with this year.
Rosenbaum: What would you say to folks who would say that's somewhat underwhelming increase given how inflation has kind of rocked our collective worlds?
Smith: That's also just one point of the changes in the child tax credit in this bill, there's three other items that we're doing.
One, we're eliminating what I refer to as the child penalty. There's a work requirement for the Child Tax Credit where you have to work so much before you can qualify. And how current law is there’s work requirements for your first child and your second child and your third child. But once you earn it with your first child, under this bill, you earn it, whether you have two children, whether you have three children or four children. That is a huge provision that will help a lot of working families.
The other thing that we're doing is raising the Child Tax Credit for people who owe federal taxes. It's been $2,000 since 2017. It has not changed even though inflation has gone up 20%. But we're starting to index it for inflation moving forward. So the top-line Child Tax Credit will continue to grow as well. So there's a couple of different levers. And the issue is that when you're in a divided government, where my counterparts on the Senate side are controlled by Democrats and we are controlled by Republicans, you have to find some common ground. And this is where we were able to get common ground when you're looking at an $80 billion tax bill.
Rosenbaum: I watched a committee hearing of this bill on Friday. And it was illuminating because it showcased some of your Democratic colleagues' positions on this pretty vividly. They wanted the Child Tax Credit to go up to [American Rescue Plan levels] of $3,600 and full refundability. Why did this bill not go that far?
Smith: Well, what they wanted would cost $120 billion a year. And over the three-year period, it would have cost $360 billion just on the child tax provisions alone. And it would have transformed the child tax credit to more of just straight-out direct checks. And that's not how the child tax credit was created. And they also didn't want work requirements. That was one of the amendments that they offered that we voted down.
Rosenbaum: I also know there was an amendment to try to have the monthly checks come back. Can you explain why Republicans oppose that?
Smith: It's like telling Americans, we don't trust you to spend your tax refund appropriately. So we're going to direct you that you only get a 12th of it every month. We believe that you can make the best decisions using your own money the way that you want. So when you get that tax refund, you should just get it all at once instead of the government actually receiving interest income by not paying you all of what they owe you.
Rosenbaum: There were obviously more things in this bill, besides the Child Tax Credit. There were a number of fairly significant business incentives. Your colleague, Missouri Congressman Emanuel Cleaver, was quoted saying: “I'm not sure I'm ready to genuflect over a deal that makes corporate tax provisions a number one priority [over the Child Tax Credit]." You're gonna hear that a lot when this bill comes up from Democrats. What is going to be your general retort to that line of argument?
Smith: Well, that's just simply not true. And why I would say that the parameters of this bill is that half the amount is on the Child Tax Credit and half is on business incentives. That's exactly what it is. It's an $80 billion bill. And that's how it's divided. It's just that the Child Tax Credit is so costly. And to do what the Democrats want, I just told you, over the same time period, it would have cost $360 billion when this one tax bill is only $80. And it's paid for by removing bad tax policy. So I would love it if the Democrats could find $360 billion, which they can't. And they don't have the solution. So if you want change, you need to do it incrementally, and it needs to be paid for, and it needs to be something that is palatable by both sides.
Rosenbaum: My understanding is the Low Income Housing Tax Credit aspect of the bill would increase the amount of credits that get distributed to states. If that's accurate, how do you think that's going to make a difference when it comes to cultivating low income housing across the country?
Smith: Well, there is no question that America is facing an affordable housing crisis. That's why addressing the housing crisis is another top priority in this bill. This is a housing tax provision that expired several years ago with a proven record of being very beneficial. It is expected just by the provision of this low-income housing tax credit, it will affect, just in our home state, 1,500 additional housing units, 2,300 jobs and $260 million in wages and business income. So it will have a pretty, pretty strong impact just in the state of Missouri.
Rosenbaum: Your colleague Congressman Mike Thompson of California noted that this bill could be a template of sorts to deal with other tough issues, such as overhauling immigration laws. Do you think this could be a signal to both parties, but particularly House Republicans, that bipartisanship isn’t a dirty word?
Smith: I've been taking arrows from different entities and different groups, because they felt like that I gave too much on the Child Tax Credit, or that we didn't go far enough. But I believe this is the best policy under a divided government. And of course, we need to do the same thing when it comes to securing our border. We need to do the same thing when it comes to funding our government. It's the same thing when you're looking at world affairs.
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