Wake up with the Washington Examiner: Child tax credit crunch, waiting for Harris to knife Biden, and why Smith is stalling

Child tax credit throwdown

Democrats and Republicans will find themselves in a strange position next year as former President Donald Trump’s signature achievement expires and a new Congress is left with an opportunity to reshape the tax code. Congress being left with work to do on rethinking the future of taxes isn’t what’s strange, though. What a divided Washington, almost certainly split by miniscule majorities in the House and Senate, will find odd is a general agreement that reworking the child tax credit is in everyone’s interest. 

In the second part of our series examining the “tax cliff” the country is speeding toward, Economics and Business Reporter Zachary Halaschak took a pulse check of how one of the most popular tax ideas could get a new lease on life. 

A brief primer from Zachary:

“The child tax credit began with bipartisan support in 1997 under President Bill Clinton. Those with children who met certain criteria were allowed to subtract the amount of the tax credit from their federal income taxes. Then, the credit was nonrefundable, meaning that the filer’s credit could not be higher than the amount of taxes owed. They would not receive a cash reimbursement.

Under President George W. Bush, the child tax credit increased from $500 to $1,000 and was made partially refundable for certain low-income taxpayers. Over the years and under subsequent administrations, the child tax credit was subtly changed and expanded, but former President Donald Trump’s Tax Cuts and Jobs Act, known as the Trump tax cuts, essentially doubled it for families.”

Politicians, of whatever stripe, aren’t winning any new votes by stripping checks away from taxpayers. Dropping an extra $2,000 into the bank accounts of parents come tax season is a political winner, even if the economic arguments are fraught and the advisers are agitating for a different approach to the popular policy. 

Democrats expanded the tax credit as part of President Joe Biden’s monster spending American Rescue Plan Act. They pushed the credit to as high as $3,600 for children under 6 and $3,000 for other children. Those payments came back down at the end of 2021 when the approved ARP funding ran out.

That’s the figure they’d like to get back to during negotiations over the tax credit’s future next year. 

Republicans would be more comfortable with a smaller credit, but they are more concerned about attaching work requirements to any payment, and indexing the return to inflation — raising the base payment while protecting its value against unknown future economic conditions. 

Critics of the credit told Zachary that lawmakers should spend more time focusing on tax policy that will do more to spur employment and investment rather than depositing checks in individual accounts. 

The credit is expensive, and while it can move margins for individual families, it does little to shape the broader landscape.

“The child tax credit has a big budget impact, and so the more of the bill, or the extension, is allocated toward the child tax credit, the less is going to be allocated to things that are better for economic growth like lowering tax rates,” Chris Edwards, an economist with the libertarian-leaning Cato Institute, told Zachary. “The child tax credit doesn’t do anything for economic growth because it doesn’t affect incentives to work and invest. It’s just sort of giving people money.”

Click here to read more about the child tax credit fight.

Harris plays defense on policy until she has to turn on Biden

Vice President Kamala Harris is running out of time and opportunity to define herself as distinct from Biden. Not that it will be easy, or optically pleasurable, for the vice president to apply for her boss’s job while she’s on the clock as his No. 2. Creating space between herself and Biden means criticizing the work they’ve done for the last 3 1/2 years — after spending all of that time preparing to take over after Biden was no longer eligible for office rather than replacing him in a bitter turf war. 

To date, Harris has largely evaded committing to any policy plan. She did come out in favor of not taxing tips — though she immediately ran into criticism that she was late to that party after Trump announced his support for the policy earlier this year. 

Her entrance into the race has brought a surge of excitement, volunteers, voter registrations, and cash. Instead of giving any of those new, bright-eyed Democrats coming back into the fold they appear to have left when Biden was in charge, Harris is playing the waiting game. 

With time running out, White House Reporter Naomi Lim laid out how Harris has positioned herself and what it is going to look like when she has no other choice but to put her policy plans up against Trump’s. 

“Harris’s campaign has embraced Biden’s more centrist record to shield her from criticism regarding more liberal policies she adopted in the past, including backing Medicare for All, the Green New Deal, Black Lives Matter, expanding the Supreme Court, a mandatory gun buyback program, a fracking ban, even a federal job guarantee, as recently as her unsuccessful 2020 Democratic primary bid,” Naomi wrote. “But it has also endeavored to posture her toward the future, for instance, through her catch-cry, ‘We’re not going back!’”

It’s a fine line she is walking. She is simultaneously painting herself as Biden’s successor — continuing to get the job done that he started. And his replacement — looking to the future of what the Democratic Party can be, unburdened by what it has been. 

Republicans are fighting tooth and nail to latch Harris to the Biden administration’s flagpole. They are either looking back to her 2019 run for president, when she ran much farther to the left than Biden, or to what she’s done in the White House to date. 

That strategy may or may not be working. Harris has a slight lead over Trump in the Real Clear Politics polling average three weeks into their matchup. 

Pinning immigration and border policy plans on Harris might stick, but as Naomi wrote, tying the administration’s record on the economy and inflation to her rather than Biden is a knot that won’t tighten. 

“Where Democrats broadly can be viewed as weaker on certain issues — like inflation — Harris carries less baggage, and trust in her hasn’t changed despite the efforts by Team Trump,” Priorities USA wrote last week in a memo.

“A separate Blueprint poll found voters blame Harris ‘far less than President Biden for inflation, trusting her more than Biden on nearly every issue, and wanting to hear more about Harris and her policies than about Trump,’” Naomi wrote. 

What comes next, and what could make or break her support, is how she turns the knife on Biden. 

“Harris trails Trump by a lot among voters who say that either the economy or immigration are the most important issues,” Suffolk University Political Research Center Director David Paleologos told Naomi.

“If she defends Biden unequivocally, she point-blank loses on those two issues, which she cannot afford to do,” Paleologos said. “Therefore, she needs to carve out where she would do things differently on these issues or suggest new policies, so long as she doesn’t throw Biden under the bus in the meantime, which would be seen as disloyal and opportunistic. It’s a tricky needle to thread.”

Click here to read more about what struggles Harris has to overcome to maintain her momentum.

Trump trial timeouts

Special counsel Jack Smith looked like he changed his mind last week when he went to U.S. District Judge Tanya Chutkan and asked her to pump the brakes on his case against Trump. The former president’s trial for his actions on Jan. 6, 2021, has moved at a snail’s pace since the Supreme Court announced it would hear arguments from his team regarding presidential immunity. 

When the court determined Trump had broad protections for official acts he made while in office, Chutkan was given the green light to start the case back up, though with vague guidelines that created strict rules around what Trump could be charged with and what he warranted an “official act” that left Smith without a legitimate way to prosecute him. 

Chutkan was anxious to get started. Trump was not. And last week, Smith signaled his own hesitation to rush forward, asking Chutkan to postpone a deadline for filings before she created a new schedule for the case to move forward. 

Supreme Court Reporter Kaelan Deese broke down what might have sparked Smith’s change of heart for us this morning.

Reasons for all but destroying the possibility of putting Trump back in a courtroom to stand trial before Election Day range from procedural planning to confidence Nov. 5 won’t be an end point for chances to move forward with the charges. 

“Without explicit explanation, Smith’s office indicated that the Department of Justice at large was taking a broader look at the impacts of the immunity decision not just in the Trump case, but how its precedent may impact other divisions at the agency,” Kaelan wrote.

The court’s presidential immunity ruling was sweeping and vague. It put the impetus on lower courts and prosecutors to determine what actions might fall under the “absolute immunity” standard and what could conceivably be argued were outside the realm of “official” acts. Smith and the Department of Justice might simply be shoring up their arguments and evidence to make sure they aren’t preparing to head down a trail that will be blocked by Chutkan or another judge. 

There’s also the possibility that Smith is working on bringing more charges against more people involved in the case. He could also be altering the charges he wants to levy against Trump, now that he has clearer guidelines — assuming any win he notches will be challenged. 

Smith included a slew of unindicted co-conspirators — unnamed but commonly identified as Rudy Giuliani, lawyer John Eastman, lawyer Sidney Powell, former DOJ official Jeff Clark, and lawyer Ken Chesebro — who could also be indicted. 

Click here to read more about why Smith might want to delay — and how the presidential election could play into his calculus.

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For your radar

Biden will travel to New Orleans for an event related to his “Cancer Moonshot.” He will tour a facility and deliver remarks at 4:30 p.m. Eastern. 

Harris has nothing on her public schedule. 

White House press secretary Karine Jean-Pierre will gaggle with reporters on Air Force One en route to New Orleans.