GOP Tax Relief Bill in Name Only

COMMENTARY Taxes

GOP Tax Relief Bill in Name Only

Feb 5, 2024 3 min read
COMMENTARY BY
EJ Antoni

Research Fellow, Grover M. Hermann Center

EJ Antoni is a Research Fellow in The Heritage Foundation’s Grover M. Hermann Center for the Federal Budget.
Elected officials need to put politics aside for a moment and assess legislation based on its merits, not its authors or a slick-sounding name. Michael Burrell / Getty Images

Key Takeaways

91.5% of the money claimed as tax relief for workers and families will instead go to expanding welfare, primarily for those who are barely working, if at all.

People who cannot work in the United States legally and are here without legal authorization would get hundreds of millions of dollars from the government.

While it may sound well intentioned to have a robust social safety net, what programs like this have done is trap people in a cycle of poverty.

When Democrats rammed the deceptively named Inflation Reduction Act through Congress in 2022, they were rightly criticized because the law caused consumer prices to go up, not down. Now, Republicans are trying to quickly pass a bill with a wordier but equally deceitful title: the Tax Relief for American Families and Workers Act of 2024.

As if it came right from Orwell’s Ministry of Truth, 91.5% of the money claimed as tax relief for workers and families will instead go to expanding welfare, primarily for those who are barely working, if at all, while offering an incentive against the formation of stable families.

The bill expands the Additional Child Tax Credit program by about one-third, which is aimed at people who pay no income taxes and provides no relief for the typical U.S. household with about $70,000 of annual income.

Instead, this is an expansion of welfare and works like a negative income tax rate, where the government pays you instead of you paying the government. Even worse, the subsidy increase will largely go to unmarried parents, an incentive against raising children in a stable family.

>>> The Tax Relief for American Families and Workers Act: Light on Tax Relief and Heavy on Welfare Expansion

It gets worse. The bill would extend new welfare subsidies to illegal aliens. People who cannot work in the United States legally and are here without legal authorization would get hundreds of millions of dollars from the government, at taxpayer expense.

Even for U.S. citizens and those here legally, the bill will result in more people on welfare instead of working. While proponents of the legislation tout it for increasing work requirements, it does exactly the opposite.

If the bill becomes law, people will no longer need to consistently hold a job to receive these payments. Instead, they could be unemployed for a year and work every other year while still receiving welfare.

The perverse incentives here are almost endless: Roughly 40% of these enhanced benefits wouldn’t even go to custodial parents but to other people who do not support the child in question and with whom the child does not live.

Then there is the issue of fraud, which looms large in any discussion of these programs. For example, the improper payment rate of the earned income tax credit is 32%, or just under one-third. The Additional Child Tax Credit has an improper payment rate of about 16%, but that would increase with larger payments because there’s more incentive to try to cheat the system.

While it may sound well intentioned to have a robust social safety net, what programs like this have done is trap people in a cycle of poverty by offering them an incentive against working. Earning even a relatively small income will reduce benefits by much more than the gains from that income, so the incentive is to stay on welfare.

And this expansion of welfare isn’t just for individuals. Corporations are in on it, too.

>>> With Food Stamps Work Requirement, GOP Budget Takes Important Step

In brief, the bill provides increased flexibility for when businesses can deduct expenses such as research and development, which will purportedly increase investment. But most of the value of this change is being made retroactively, meaning it will include previous tax years. Businesses cannot change the past, so this will do nothing to alter economic decisions that have already been made.

Instead, according to the Joint Committee on Taxation, this will cost tax revenue and have no positive impact on economic growth.

And that’s just one way in which this legislation would increase the deficit. Overall, it leaves a $117 billion fiscal gap in 2024 alone, when the deficit is already expected to exceed $2 trillion. Ironically, this would fan the flames of inflation, which is fundamentally a tax. Yet again, this bill does the opposite of its name. It fails to provide tax relief, and it technically does just the opposite.

Democrats do not have a monopoly on counterproductive legislation, as some Republicans in Congress are demonstrating today. Likewise, Republicans, not just Democrats, give deceptive names to the bills crafted by their staff.

Elected officials need to put politics aside for a moment and assess legislation based on its merits, not its authors or a slick-sounding name. The legislation’s gratuitously panegyric nomenclature is a facade of tax relief that merely sticks our country’s middle class with another bill.

This piece originally appeared in The Washington Times