Personal Finance

GOP opposition to child tax credit bill could be softening in Senate

Published

10 months ago

April 9, 2024

Bipartisan legislation to cut taxes for working families and extend certain corporate tax breaks has stalled in the Senate over Republican opposition. But the bill’s prospects could be growing rosier as lawmakers prepare to return to Washington next week from a long recess.

Privately, some GOP lawmakers have said they’re increasingly willing to support the bill with small changes that the measure’s Democratic sponsor has already offered, according to four people involved in the conversations who spoke on the condition of anonymity to discuss private talks.

In a sign of possible momentum, Senate Majority Leader Charles E. Schumer (D-N.Y.) wrote to lawmakers Friday that the upper chamber could consider the bill — along with measures to regulate TikTok, address rail safety and lower health-care costs — “in the weeks and months ahead.”

Once the Senate wraps up impeachment proceedings against Homeland Security Secretary Alejandro Mayorkas, expected to take up most of lawmakers’ time next week, Schumer could put the tax bill to a vote on or shortly after the April 15 tax deadline.

The $79 billion legislation pairs an expansion to the child tax credit — a major priority for President Biden and Democrats that nonpartisan estimates say would lift 400,000 children out of poverty — with business tax incentives initially authorized in 2017 under President Donald Trump.

The Internal Revenue Service has said it could apply the credit retroactively, but lawmakers have still been eyeing the filing deadline as a possible time peg for action on the measure.

It was the product of a deal struck between Sen. Ron Wyden (D-Ore.) and Rep. Jason T. Smith (R-Mo.), the chairs of Congress’s tax-writing committees, after seven months of talks, and it passed the House with broad bipartisan support in January.

The bill has run into opposition from Sen. Mike Crapo (Idaho), Wyden’s Republican counterpart on the Finance Committee, over a provision that would allow low-income families to use a prior year’s return to earn a larger tax credit. Many Republicans have publicly followed Crapo’s lead, hoping to give him more leverage to seek changes to the legislation that dial back the credit for families.

Privately, though, numerous Republican senators say they could support the legislation without some of those changes, but don’t want to outwardly break with a well-liked and powerful member of their caucus, the four people who have discussed the measure with them said.

These people — three lobbyists and a senior GOP Senate staffer who have had in-depth conversations with lawmakers and senior staffers about the bill — said that in private, a sufficient number of Republicans to overcome a filibuster support the legislation, but many of them do not want to cross Crapo and other GOP leaders who hope to extract more concessions from Wyden and Smith.

“The thing that we see differently now is there does not seem to be the willingness that anyone is going roll Crapo,” one of those people said. “That’s pretty clear from Republicans now. We see that the path forward for this bill is that concessions need to be made.”

A left-leaning advocacy group had a similar read.

“We’ve had conversations with over a dozen Republican Senate offices and heard significant support for the bipartisan tax package and enthusiasm both for the [research-and-development] credit as well as for the child tax credit provision,” Adam Ruben, director of Economic Security Project Action. “I would predict that if this comes to a vote, I think the votes are there. … Will it come to a vote [and overcome a GOP filibuster threat] is another question.”

Wyden offered to alter the legislation to address some of Crapo’s concerns, swapping out the “look back” section and instead further expanding eligibility for the poorest families who qualify for the credit. Crapo rejected that offer: He has said negotiations with Wyden were “at a standstill.”

“The issue set is the same issue set that’s been out there for a couple of weeks now,” Crapo told The Washington Post before Congress went on recess at the end of March.

Ultimately, public support for the bill hinges on Crapo’s stance in negotiations, the people and multiple lawmakers said. Lawmakers say Crapo, who is in line to chair the Finance Committee if Republicans retake the Senate in November’s elections, is eyeing a larger tax package in 2025 that could contain more conservative policies and hopes to use the prospect of a GOP-written tax plan next year to extract more changes from Wyden — or defeat the measure entirely.

Trillions of dollars in tax cuts enacted under Trump are slated to expire at the end of 2025, which means Congress will probably be working on tax policy next year regardless of who wins the elections.

“I think Crapo wants to make it better,” Sen. Lindsey Graham (R-S.C.) said. “I like to help people raising children with the child tax credit, and there’s a bunch of other business things in there that I hear a lot about from my constituents. But with work requirements, there’s some things that Crapo wants to do and I sort of trust his judgment.”

Another key Republican, Sen. Mike Rounds (S.D.), echoed that sentiment.

“I have spoken with our ranking member, Mike Crapo, and I don’t think it’s ready for prime time yet,” Rounds said. “I think they’re still negotiating. But I’ll take my cue right now based on what his analysis is.”

Wyden is still offering to drop the ability for taxpayers to use a previous year’s return to quality if it will draw Republicans on board.

“While I think the policy is important, I’ve offered to take it out of the bill if it gets this over the finish line,” he said during a committee hearing in late March. “Working with groups, we have found a way to do this and still lift the same number of kids out of poverty. As of this morning, my offer on the look back is still on the table.”

Some key Republicans hope Wyden succeeds. A high-profile Finance Committee member, Sen. Todd Young (R-Ind.), urged Senate leaders to move forward even if Crapo cannot secure more changes to the legislation. And a member of GOP leadership, Sen. Steve Daines (Mont.), has said the bill even without changes was “very important for global competitiveness” because of the corporate tax provisions.

The new legislation would expand the child tax credit to allow low-income families to claim the benefit for multiple children; under current law, the lowest-earning families can only receive the credit for one child. Starting in 2025, for the 2024 tax year, the benefit would be linked to inflation, which would add up to a roughly $100 boost next year.

The proposed larger refundable tax credits for more low-income parents could lift 400,000 children out of poverty, according to nonpartisan estimates. And Democrats and Republicans alike have cheered provisions that would allow businesses to write off research-and-development and interest expenses and investments in new equipment.

The tax credit was expanded temporarily in 2021, increasing the amount it provided and extending eligibility. Those changes kept 3 million children out of poverty, according to research conducted by Columbia University’s Center on Poverty & Social Policy. But the expansion expired at the end of 2021, and child poverty rates jumped back up after that.

Personal Finance

Trump funding freeze is existential threat: Morehouse College president

Published

8 hours ago

January 30, 2025

Business Finance News

Morehouse College President David Thomas speaks during Morehouse College’s graduation ceremony, before US President Joe Biden delivers his commencement address, in Atlanta, Georgia on May 19, 2024.

Andrew Caballero-Reynolds | Afp | Getty Images

David Thomas, the president of Morehouse College, said his office fielded a surge of calls this week from worried students and their families concerned the Trump Administration’s “federal funding freeze” would directly impact college access.

The sudden scramble was “perhaps only rivaled by what happened in March of 2020 when we realized that the Covid pandemic was truly a threat,” Thomas told CNBC. He became president of Morehouse, one of the country’s top historically Black colleges and universities, or HBCUs, in 2018.

This freeze on federal aid “would create another existential threat as great as the pandemic,” he said.

Thomas’ comments come amid ongoing confusion about how a freeze on federal grants and loans could potentially impact students and schools.

A Jan. 27 memo issued by the Office of Management and Budget, which would affect billions of dollars in aid, said the pause on federal grants and loans “does not include assistance provided directly to individuals.”

Although the memo was later rescinded, the White House said a “federal funding freeze” remains in “full force and effect.” It is currently on hold amid legal challenges.

Thomas, who is also on the Board of Trustees at Yale University, said college leaders across the country have spent the better part of the week focused on “the consequences of this action.” Morehouse immediately initiated a hiring freeze in preparation for a potentially significant financial disruption.

“All of the institutions are still in limbo,” he said.

What college aid may be affected

At Morehouse College, about 40% of the student body relies on Federal Pell Grants, a type of federal aid available to low-income families.

Following the memo’s release, the Education Department announced that the freeze would not affect student loans or Pell Grants.

“The temporary pause does not impact Title I, IDEA, or other formula grants, nor does it apply to Federal Pell Grants and Direct Loans under Title IV [of the Higher Education Act],” Education Department spokesperson Madi Biedermann said in a statement.

In addition to the federal financial aid programs that fall under Title IV, Title I provides financial assistance to school districts with children from low-income families. The Individuals with Disabilities Education Act, or IDEA, provides funding for students with disabilities.

The funding pause “only applies to discretionary grants at the Department of Education,” Biedermann said. “These will be reviewed by Department leadership for alignment with Trump Administration priorities.”

President Trump moves to halt federal grants

But questions remain about other aid for college.

The freeze could affect federal work-study programs and the Federal Supplemental Educational Opportunity Grant, which are provided in bulk to colleges to provide to students, according to Kalman Chany, a financial aid consultant and author of The Princeton Review’s “Paying for College.”

The disruption to federally backed research funding also poses a threat to college programs and staff.

‘Lots of reasons to still be concerned’

“There are lots of reasons to still be concerned,” said Jonathan Fansmith, a senior vice president at the American Council on Education.

“The administration has made it clear the executive orders will have implications for a huge range of existing awards and grants,” he said. “Those have implications for campuses and there is no more clarity in that regard than there was before.”

At Morehouse, “a huge portion of our faculty is supported by grants,” Thomas said. “If we can’t run the college, colleges like ours will probably be forced to drastically shrink themselves or close.”

Morehouse, located in Atlanta and founded in 1867, has more than 2,200 students.

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Personal Finance

What federal employees need to consider when evaluating offer to resign

Published

10 hours ago

January 30, 2025

Business Finance News

A “Do not cross” sign is illuminated at a crosswalk outside of U.S. Capitol building in Washington, US, November 10, 2024.

Hannah Mckay | Reuters

The Trump administration emailed more than 2 million federal workers this week, giving them the option to resign now and get pay and benefits through Sept. 30.

Workers have until Feb. 6 to accept the “deferred resignation” offer.

The payouts come on the heels of President Donald Trump‘s executive order to end DEI programs. On Wednesday, he said federal workers need to return to the office five days a week “or be terminated.”

“We think a very substantial number of people will not show up to work, and therefore our government will get smaller and more efficient,” Trump said at the signing of an immigration detention law.

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Experts advise federal employees to take their time before accepting the offer. By accepting the resignation, tenured federal employees could lose certain rights they may have.

“If you resign, it’s deemed voluntary,” said Michael L. Vogelsang, Jr., a principal of The Employment Law Group, P.C. “If you are a permanent, tenured employee in the government and the administration wants you out, laws still exist that federal employees cannot just be fired on a whim.”

Meanwhile, some lawmakers question whether the president can make this offer without Congressional approval.

Sen. Tim Kaine, D-Virginia, said federal employees should not be “fooled” by Trump’s proposal.

“If you accept that offer and resign, he’ll stiff you,” Kaine said. “He doesn’t have any authority to do this.”

The Voluntary Separation Incentive Payment Authority gives federal agencies the authority to offer buyout incentives for some employees to resign or retire, but it is capped at $25,000.

Asked for more detail on the payouts, including what authority the president has to offer to pay through September 30, the White House referred back to its statement given on Tuesday.

“If they don’t want to work in the office and contribute to making America great again, then they are free to choose a different line of work and the Trump Administration will provide a very generous payout of eight months,” White House press secretary Karoline Leavitt said in a statement.

There is already uncertainty around current funding for the federal government. It’s operating under a short-term continuing resolution passed in December. Unless Congress acts, the federal government could shut down on March 14.

Unlike with corporate buyouts, federal employees who received this offer can’t appeal for a better deal, experts say.

“Usually with buyouts, I think of more severance, and usually it’s sort of some kind of negotiation. This isn’t really negotiation. It’s sort of a unilateral offer,” Vogelsang said.

Still, some of the factors to consider for weighing the government’s deferred resignation offer are similar to what one would weigh in a corporate buyout, experts say:

Consider how much your position is at risk

For federal employees who aren’t permanent, Vogelsang says they should consider how much their position is at risk and if their skills make it likely they’ll be able to find another job.

“I think there’s enough executive orders out there that people in DEI, probationary employees, IRS employees, environmental employees, can probably read between the lines that their positions may be at risk moving forward,” he said.

Research job alternatives

Career experts advise not waiting to begin the job search.

“Start thinking about your search now, because it’s going to be longer than you think, especially with people flooding the market,” said Caroline Ceniza-Levine, a career coach and founder of Dream Career Club.

Prepare for a job search by updating your LinkedIn profile, identifying your accomplishments and reflecting on professional achievements so you can explain them clearly and concisely. “You don’t get every job that you apply for, and that can be a very frustrating and emotionally draining process,” said Ron Seifert, senior client partner at the staffing firm Korn Ferry.

Consider the work culture if you stay

Think about the culture and career implications of rejecting the offer. A question to ask yourself is, “If I’m still here after this is done, what will this place feel like?” Seifert said. “Is this a place where I have opportunity?”

“I would caution people against making decisions when they’re in the panic zone,” said Connie Whittaker Dunlop, principal of Monarch Consulting Group. “There are a fair number of unknowns, but if you can kind of ground yourself in what you know, what you value, and then make that, make a decision from that space, I think, people will be better served.”

Personal Finance

These child tax credit mistakes can halt your refund, experts say

Published

12 hours ago

January 30, 2025

Business Finance News

Millions of families claim the child tax credit every year — and filing mistakes can delay the processing of your return and receipt of your refund, according to tax experts.

For 2024 returns, the child tax credit is worth up to $2,000 per kid under age 17, and decreases once adjusted gross income exceeds $200,000 for single taxpayers or $400,000 for married couples filing jointly.

The refundable portion, known as the additional child tax credit, or ACTC, is up to $1,700. Filers can claim the ACTC even without taxes owed, which often benefits lower earners.

However, a lower-income family who doesn’t know how to claim the credit “misses out on thousands of dollars,” National Taxpayer Advocate Erin Collins wrote in her annual report to Congress released in January.

More than 18 million filers claimed the additional child tax credit in 2022, according to the latest IRS estimates.

By law, the IRS can’t issue ACTC refunds before mid-February. But the Where’s My Refund portal should have status updates by Feb. 22 for most early filers, according to the IRS.

Here’s how to avoid common child tax credit mistakes that could further delay your refund.

Know if you have a ‘qualifying child’

One child tax credit mistake is not knowing eligibility.

The rules can be “very confusing,” according to Tom O’Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals.

To claim the child tax credit or ACTC, you must have a “qualifying child,” according to the IRS. The qualifying child guidelines include:

Age: 17 years old at the end of the tax year
Relationship: Your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister or a descendant of these
Dependent status: Dependent on your tax return
Filing status: Child is not filing jointly
Residency: Lived with you for more than half the year
Support: Didn’t pay for more than half of their living expenses
Citizenship: U.S. citizen, U.S. national or a U.S. resident alien
Social Security number: Valid Social Security number by tax due date (including extensions)

You may avoid some eligibility errors by filing via tax software or using a preparer versus filing a paper return on your own, O’Saben said. Tax software typically includes credit eligibility, which can minimize errors.

Missing Social Security number

Typically, parents apply for a Social Security number in the hospital when completing their baby’s birth certificate. But it can take one to six weeks from application to receive that number, according to the agency, which can create time pressure for families with a new addition around tax season.

Filing a tax return and claiming the child tax credit before receiving the Social Security number is a mistake, O’Saben said.

“I have seen [the child tax credit] denied for people who have filed before they got the Social Security number for a dependent,” he said. “And there’s no going back.”

If you don’t have the number before the tax deadline, you should request an extension, which gives you six months more to file your return, O’Saben explained.

However, you still must pay taxes owed by the original deadline.