The Washington PostDemocracy Dies in Darkness

Opinion The GOP broke the tax code. Democrats should demand something before fixing it.

Sen. Charles E. Schumer (D-N.Y.) discusses the child tax credit during a news conference on July 15, 2021. (Michael Blackshire/The Washington Post)
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Before Democrats even think about giving away another tax break to corporations, they should demand more dollars for poor kids.

After all, kids are the constituency that Democrats are supposed to care more about.

As the midterms inch closer, corporate lobbyists are demanding an extension of a key tax break relating to research and development. The basic background: Historically, the tax code had allowed companies to write off the cost of R&D spending immediately (rather than doing so more gradually, over several years after the fact). This meant companies could lower their tax bills right away, rather than in dribs and drabs over multiple years.

This longtime perk expired, though, at the end of 2021.

Industry groups such as Business Roundtable are working hard to get Congress to retroactively restore it, and they have issued dire warnings about the economic damage that might occur if lawmakers don’t swoop in to the rescue. Republican lawmakers have been agitating for the tax break’s revival, too.

Here’s the twist: It was Republicans who took the tax break away in the first place.

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If you’re confused about why they might have done this, you’re not alone. After all, back in 2017, when Republicans controlled both Congress and the White House, they passed an enormous corporate tax cut.

To help make their corporate rate cuts as large as possible, Republicans included some measures that would (ostensibly) raise a little bit of money to offset the cost. Among these supposed pay-fors was this change to the tax treatment of R&D spending.

The business lobby wasn’t super-psyched about these revenue-raisers, but the measures generally were not scheduled to bite right away. They would take effect several years down the road, if they happened at all.

In fact, the presumption at the time was that these provisions might never materialize because future Congresses would step in and reverse them first. One of the architects of that 2017 GOP tax overhaul, Rep. Kevin Brady (R-Tex.), even publicly and repeatedly endorsed proposals to undo his own handiwork.

In other words, the R&D change was a cynical gimmick intended to make the bill look cheaper for official budget scorekeeping purposes — but that leading Republicans never actually expected, or wanted, to happen.

Republicans, of course, no longer control the legislature. But Democrats also tend to like the idea of incentivizing companies to invest in more research and experimentation. So, Democratic lawmakers seem to be on board with doing cleanup for Republicans this year.

The question now is what Democrats should demand in return for bailing out Republicans — that is, for thanklessly fixing a section of the tax code that their GOP counterparts deliberately broke.

The best answer: More money for poor kids, through a revived expansion of the child tax credit.

Maybe this trade sounds like it’s coming out of left field. It isn’t. Negotiations for a deal along these lines — bigger child tax credit, in exchange for corporate tax break — have been quietly ongoing for months. And the case for prioritizing poor kids in any end-of-year deal got a whole lot stronger this week.

Newly-released census data revealed something almost magical: Child poverty rates fell nearly in half in 2021 compared with a year earlier, down to the lowest child-poverty level ever recorded. This wasn’t an accident. It was a deliberate choice made by Congress. More than 2 million children were kept out of poverty last year because Democratic lawmakers — temporarily — expanded the child tax credit.

The Democrats’ expanded child tax credit lasted only a year, though, and has since lapsed. And while Democrats this year have delivered on promises to other core constituencies — including elderly Medicare beneficiaries and labor unions — they have yet to target more aid to poor kids.

That’s partly because of opposition from a single Democratic senator, Joe Manchin III (W.Va.), to reviving the child program. But — fingers crossed — the stars could now be aligning for a bipartisan deal.

Some Republicans, eager to boost their “family values” bona fides, have already expressed interest in expanding the child tax credit. They’re unlikely to support the exact program Democrats had in place last year. But a compromise measure might now be able to cobble together a few critical votes from Republicans — particularly if those Republicans see the fate of kids as inextricably linked to that of a constituency the GOP always prioritizes above all else (i.e., corporations).

Democrats should use the leverage they now have with Republicans to deliver for the most vulnerable Americans — unless Democrats wish to demonstrate that they, too, care more about corporations than they do about kids.