The One Big Thing from JD Vance’s Sunday Show Tour

Below, does it take a village to mind its own damn business? But first…

VANCE GOES BIG ON FAMILY POLICY

Vice presidential candidate JD Vance is winning deservedly rave reviews for his tour of the Sunday shows yesterday (ABC’s This Week, CBS’s Face the Nation, and CNN’s State of the Union), where he illustrated the political promise of a well-articulated conservative populism. Mostly he was parrying hostile questions, defending his and Donald Trump’s records, and attacking the Harris-Walz ticket. But he made one particularly newsworthy comment to CBS:

I’d love to see a child tax credit that’s $5,000 per child. … President Trump has been on the record for a long time supporting a bigger child tax credit, and I think you want it to apply to all American families. I don’t think that you want this massive cut off for lower income families, which you have right now.

How would this look in practice?

Is there a model to work from? Yes, there is.

Providing parents with $5,000 per child per year would represent an extraordinary leap for American family policy, more than doubling the Child Tax Credit (CTC)’s current value of $2,000, and far exceeding even the temporary support during COVID. But Vance is describing two important ideas here, both enlarging the credit and making it accessible to more families.

A key shortcoming of the traditional CTC is that, as a tax credit, it was designed only to reduce taxes owed. Thus, a high-income family with a high tax bill could claim the credit’s full value, but a low-income family with little or no tax liability would see little or no benefit. The bigger the CTC gets, the bigger the problem gets. A working-class family might have a few thousand dollars of tax liability and thus benefit from a credit worth that amount. But a proposal like Vance’s to deliver $5,000 per child—meaning $15,000 for a family with three kids—cannot possibly rely on just reducing tax burdens; for a family with a low-to-moderate income, struggling to make ends meet, there’s nowhere near enough tax burden to reduce. Thus Vance’s comment that: “I think you want it to apply to all American families. I don’t think that you want this massive cut off for lower income families.”

Before we get into how that might look, it’s worth noting how sharply anything along these lines rejects the position of the Old Right’s legacy institutions, which hold that letting people keep their own money is a “tax cut” but sending them money beyond what they might have paid in taxes is “welfare.”

• The Wall Street Journal editorial board has mocked the CTC as a “kid discount,” writing “these credits are an expanding black hole for revenue that could be used to lower taxes for everyone. Think of it as a progressive insurance policy against pro-growth tax policy.”
• American Enterprise Institute (AEI) president Robert Doar has warned that proposals to increase the credit’s value and make more of it available to low-income workers would be “ill-advised expansions of welfare spending that increase government dependency and attract illegal immigration.”
• The Heritage Foundation’s Robert Rector calls CTC payments in excess of tax liability “new cash welfare payments … primarily to subsidize single parents.”
• In the most telling reminder of the distance from Old to New Right, the last Republican vice president, Mike Pence, now leads a group called Advancing American Freedom that complains a proposal like Vance’s would “transform[] the CTC into yet another welfare program.”

On the principle, they are wrong to condemn any support in excess of tax liability as “welfare.” As I observed earlier this year, during the recent debate over a more modest CTC expansion that prompted all the condemnations:

It’s unfortunate that a small segment of the American right-of-center, like the former high school quarterback who hasn’t done much since, can’t stop talking about the welfare reform of 1996. Every policy fight is that policy fight. The problem is always that people are not working enough; the primary measuring stick for every policy is whether it will get people working more.

But it is not 1995 anymore. Back then, a truly perverse safety net paid parents cash not to work at all and withdrew the cash if they did. That is a recipe for trapping people in poverty and creating a permanent underclass; that is a program to be fought against. Conversely, if a policy provides benefits only to families that do work and provides the same or higher benefits to families that work more, the welfare reform playbook is inapt. Conservatives should oppose a move back toward the pre-1996 model. But they should support policy that gets the most resources to the working families most in need, that makes joining the labor force and earning income generally more attractive, and that also affords a parent greater flexibility to take time off after giving birth, or to spend fewer hours in the labor market and more hours at home with a young child. If any of those outcomes strike you as a problem, you may be the problem.

Refusing to offer any benefit in excess of tax liability has left conservatives aiming their family policy away from the working-class families who should be its main target. Vance appears eager to leave behind that hobgoblin of narrow minds. But it does leave open a critical question, that he or Trump will have to address: Who is eligible to receive the credit?

The prior Republican position limiting the credit to tax liability is one unfortunate extreme, but equally unfortunate is the opposite extreme preferred by Democrats: that everyone should receive the full credit regardless of whether they have any income at all. This was the approach preferred by the Biden administration and taken in the 2021 American Rescue Plan (ARP), which for one year paid an expanded and unconditional CTC to every family.

Eliminating any work requirement converts the program into a proto–Universal Basic Income, deserves the Right’s “welfare” criticism, and is wildly unpopular. A survey conducted by American Compass in 2021 found that only 28% of respondents preferred making the COVID-era ARP version of the CTC permanent with no work requirement. The White House pitched the policy as a “significant tax cut to America’s working families” and its website for the program used the phrase “working families” five times in three paragraphs, before featuring four illustrative families that were all earning income of their own.

So if you don’t want tax liability to determine eligibility, but you still want the credit connected to work, what should you use? The correct answer is income. Eligibility for the credit should rise with a family’s income, the most straightforward model being a dollar-for-dollar match. Or, put another way, the credit that a family can earn should be capped at the income it earned the prior year. Thus, a family with no income of its own cannot receive the credit. (It should still receive assistance, and a wide range of anti-poverty programs provide just that; but large cash payments should be reserved for families that are also working to support themselves.)

This dollar-for-dollar phase-in creates an extraordinarily strong incentive for a family to have someone in the household connected to the workforce, and it ensures that a family with someone working will almost always be eligible for the full credit. Even a part-time job at minimum wage would generate sufficient earnings to claim the full credit with three children.

American Compass pioneered this approach in our 2021 paper, The Family Income Supplemental Credit (Fisc), which envisioned a $4,800 credit for younger children, and the Fisc model has since become popular with conservative reformers. Senator Josh Hawley’s Parent Tax Credit required “prior-year earnings equal to or greater than earned income from 20 hours per week of work at the federal minimum wage, an earnings threshold of $7,540.” Senators Mitt Romney, Steve Daines, and Richard Burr’s Family Security Act 2.0 required that “a family must have earned $10,000 in the prior year to receive the full benefit… Families earning less than $10,000 will receive a benefit proportional to their earnings.”

That latter proposal received especially broad support from conservatives, including prominent pro-life groups, scholars at think tanks like AEI and the Ethics & Public Policy Center, and columnists from Ross Douthat and David French to Conn Carroll and Ramesh Ponnuru.

Will Trump and Vance go this direction? One can hope! As I noted over the weekend in the Financial Times:

In selecting Ohio senator JD Vance as running mate, Trump was opening the door to more fully embracing Vance’s brand of conservative economics, with the potential to solidify a governing majority on a foundation of broad working-class support. … To strengthen his coalition, Trump … could build his vague ‘baby bonus’ into a real plan for families. On all these fronts, Vance has already shown leadership in the Senate and could provide robust reinforcement.