Can It Pass? Grassley Introduces Bill to Protect Tax Credits From Inflation
Under a Democratic president and a Democratic-controlled Senate, Grassley’s proposal is unlikely to become law.
The expanded child tax credit is gone, after expiring at the end of 2021. Now, one senator has introduced a bill that would make changes to that credit. However, it would look quite different than the one passed in last year’s American Rescue Plan Act.
Sen. Charles Grassley (R-IA) has introduced the Family and Community Inflation Relief Act to, as the name of the bill suggests, fight inflation.
The Act “would target relief to low and moderate income Americans. The bill would ensure tax benefits afforded to families, students and others are not eroded at a time when they are seeing their paychecks shrink and costs rise due to inflation.”
The bill would index for inflation several existing credits, including the Child Tax Credit, the Child and Dependent Care Credit, the American Opportunity Tax Credit, the Lifetime Learning Credit, the Student Loan Interest Deduction, and the Charitable Mileage Deduction.
In addition, per Grassley’s announcement, “the proposal extends the current law cap on the state and local tax (SALT) deduction to pay for the inflation relief provided in these provisions. Under current law, a taxpayer may deduct up to $10,000 of any state and local taxes paid. The current SALT cap is scheduled to expire after 2025, which would allow for an unlimited SALT deduction the benefit of which would primarily accrue to wealthy taxpayers. This provision extends the current SALT cap for one year, which is expected offset the cost of the above provisions.”
According to Business Insider, the system created by the Grassley bill would not establish monthly payments, like the ones that were in place as part of the expanded child tax credit in 2021.
“The relentless 40-year high inflation we’re seeing today has made it increasingly difficult for Americans to afford their trips to the gas station and grocery store,” the Iowa senator said in a separate press release. “While President Biden has failed to produce any meaningful solutions to the economic crisis he created, I’ll continue working on commonsense policies that will help Americans weather this soaring inflation.”
Under a Democratic president and a Democratic-controlled Senate, Grassley’s proposal is unlikely to become law, at least during the current Congress.
The Niskanen Center endorsed the idea of indexing the tax credits.
“Indexation is a simple and essential tool that policymakers can use to prevent the subtle erosion of family tax benefits over time,” the Center said. “The Reagan administration made a concerted effort to protect families from the impact of inflation by indexing most major tax exemptions, deductions, and credits. The CTC’s predecessor—the dependent exemption—was indexed as part of Reagan’s 1981 tax cuts, and the earned income tax credit was also indexed as part of the 1986 tax reforms.”
Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.