LET’S TALK MORE ABOUT BASELINES: To many budget experts, it’s a gimmick. But let’s put a finer point on why Republicans might want to use an approach that says it costs nothing to keep the current tax cuts on the books. One big reason is that it would almost certainly allow them to extend the temporary parts of the Trump tax cuts for much longer — perhaps even permanently, and thus save Republicans a potential fight down the line with Democrats who would want the tax cuts for the better off to expire. A current-policy baseline “introduces not just the possibility, but the likelihood that they’re making these permanent changes,” Rohit Kumar of PwC, a former senior Senate GOP aide, said recently. On the flip side, Kumar said that “no one thinks” that Republicans have the votes for a permanent TCJA extension if they have to fully offset trillions and trillions of dollars worth of costs, something that would be required under the budget reconciliation process if they stick to a traditional current-law baseline. A good precedent? It’s worth noting — Republicans would also be treading very new ground in using a current-policy baseline for a reconciliation measure, even as they’ve noted that Democrats have praised that approach in the not-so-distant past. And some Republicans believe that going that route would be a decision that the party eventually regrets, because Democrats would use that precedent to do similar things the next time they take full power in Washington. George Callas of Arnold Ventures, who was a top House GOP tax aide when the TCJA was passed, has noted that Democrats could have permanently extended the expansive version of the Child Tax Credit they passed in 2021 with no issue if they used a current-policy baseline. "If Republicans' goal is to reduce wasteful government spending, I cannot conceive of a more counterproductive move than to hand a future Democratic majority a magic wand by which they could enact Build Back Better, Medicare for All and the Green New Deal as ‘emergency spending’ for one year, and then make them all permanent while claiming the cost is zero,” Callas told Weekly Tax. TRYING TO MAKE THE CUT, CONT’D: No matter what is happening with a House budget, the battle that various advocates are waging to ensure their priorities are in a final tax bill this year isn’t slowing down. Here’s a new entry: The First Five Years Fund, a group aimed at boosting early childhood development, is launching a new campaign seeking to expand the Child and Dependent Care Tax Credit in 2025. The Child Tax Credit frequently has overshadowed the child care tax credit in D.C.’s public policy debates, particularly in the last several years — to the point that some of those working on tax benefits for families have proposed folding the CDCTC into the CTC. But the First Five Years Fund believes that policymakers will be open to expanding the CDCTC this year, given the continued rising costs of child care and maybe even rising acceptance of its importance. The group is launching what it says will be a multi-million dollar national advocacy campaign that will include digital advertising and direct mail, grassroots events and new polling as it tries to gin up a new effort to offer a larger tax benefit for child care. "We want the biggest and boldest expansion possible,” Sarah Rittling, the First Five Year Fund’s executive director, told Weekly Tax. “But any expansion of the tax credit would be helpful.” There is some recent precedent for making the credit bigger: Democrats expanded it as part of their coronavirus response measure early in the Biden administration, to a maximum benefit of $10,500 per family. The credit now maxes out at $6,000 per family, but a proposal last year from Sens. Katie Britt (R-Ala.) and Tim Kaine (D-Va.) would expand it and make the incentive refundable. Advocates also note that House Ways and Means Chair Jason Smith (R-Mo.) previously sponsored legislation that would have made the child care credit refundable. The First Five Year Fund’s campaign will be national, but with at least an initial focus on the states and districts of key players, like Smith, in this year’s tax debate. Important congressional players and top tax writers in states like Arizona, Illinois, Indiana, Iowa, Maine, New York, North Carolina, Ohio, Oklahoma and Texas will be another focus. Rittling acknowledged that there is a lot of competition also jousting to make the final cut in a tax bill. But she added that her group feels comfortable that they no longer have to defend the credit from efforts to roll it into the Child Tax Credit, and that how the pandemic scrambled work situations has given policymakers a better appreciation for strengthening incentives for making child care more affordable. “We feel really strongly that we need to play the game and get involved,” Rittling said. “We are not in a defensive mode anymore.”
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