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Bipartisan tax deal has big health implications

Jan 29, 2024
Illustration of a paper cut family, with the child in the middle made of a dollar bill.

Illustration: Maura Losch/Axios

Beyond extending multiple tax breaks, the bipartisan tax agreement that could be brought up in the House this week has big implications for the health of children in low-income households.

Driving the news: The legislation unveiled earlier this month by House Ways and Means Chair Jason Smith and Senate Finance Chair Ron Wyden would increase the refundable portion of the Child Tax Credit so that lower-income families who don't owe income taxes would still get a credit.

  • Health policy experts say that could have a ripple effect, by reducing anxiety and depression and improving physical health outcomes among disadvantaged families and people of color.

Zoom out: Low-income people often have to forgo health care in order to pay for necessities like rent or food.

  • The end of major pandemic-era safety net program expansions put more families in a bind as inflation made the cost of living rise.
  • Under the 2021 American Rescue Plan, families were able to receive a $3,000 to $3,600 tax credit per child for all families, but it only was in effect for 2021.
  • That credit was received in the form of an automatic monthly payment rather than an annual lump sum refund.

The Child Tax Credit policy in the current version of the Wyden-Smith tax package is different, in that it's targeted to the most low-income families and aimed at allowing those with multiple children to claim the benefit for every child.

  • It's estimated that 16 million children would benefit from the proposal in its first year.
  • The maximum amount of tax credit that would be refunded per child would increase each year from 2023 to 2025 (from $1,800 in 2023, $1,900 in 2024 and $2,000 in 2025). It's also indexed to inflation for the first time.

What they're saying: Wyden told Axios that the health implications of the CTC were "hugely important" and he said it was an aspect of the bill that he's discussed with Republican colleagues.

  • "If you're improving the lives of 16 million vulnerable kids, you know what you're doing for them, is you're making it possible for them to get more nutritious food. A pair of shoes that don't have holes in them," Wyden said.
  • "This is lifeline stuff. And it's directly connected with the health and well-being of kids," added Wyden.
  • Rep. Suzan DelBene, who's been one of the big proponents for the CTC in the House, told Axios that lifting kids out of poverty means they have better outcomes, including fewer chronic health conditions when they're older.
  • "When you think about things like housing and food that's so critical to a child growing up healthy," said DelBene. "If we make those investments when they're young, it leads to much better outcomes for their life overall."

Context: Research has shown a direct connection between lower incomes and declining health outcomes, and that the previous CTC expansion had a positive effect including on health outcomes.

  • Children who are experiencing poverty are more likely to have developmental disabilities and worsening health as well as develop chronic health problems and depression later in life.
  • The U.S. Census Bureau found that 2.9 million children were lifted out of poverty due to the CTC's expansion in 2021.
  • The 2021 CTC also reduced food insufficiency among low-income families with children by 25%.
  • Another study showed that there were fewer depressive and anxiety symptoms among lower-income adults who received the CTC in 2021, but they didn't utilize more mental health care.

The big picture: "We know that poverty is significantly associated with increased morbidity and mortality. And it is a mutually reinforcing cycle. So the more poor you are, the sicker you are, and the less likely you are to work to take in additional income to lift you out of poverty," said Avenel Joseph, vice president for policy at the Robert Wood Johnson Foundation.

Yes, but: The tax agreement has angered multiple GOP lawmakers, who say they were blindsided by Smith's dealmaking.

  • The friction could threaten plans to bring it up for a House vote this week.
  • Senate Republicans are saying they want to hold a mark-up before floor consideration, and some have cited issues with how the Child Tax Credit was crafted.
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