News that Senators Michael Bennet, a Democrat, and Mitt Romney are advancing a bipartisan proposal for a refundable child tax credit is a major development in the evolution of a nascent conservative consensus in favor of a universal child benefit.
Niskanen Center scholar Samuel Hammond and Endicott College professor Josh McCabe already have undertaken to understand how the proposal would function relative to the status quo, who would benefit, and the potential effects on child poverty, labor-force participation, and so on. Their recent analysis decidedly points in its favor.
Hammond and McCabe are among a group of reform-oriented conservatives who have been advancing the case for a pro-family agenda that provides cash transfers to low- and middle-income families with children. It’s too soon to say, though, whether the Bennet-Romney proposal will receive broader-based support from conservatives and Republicans. Evidence from the Tax Cut and Jobs Act suggests that a refundable child tax credit will invariably encounter a combination of ideological and substantive objections from different parts of the political movement.
Still, it’s notable that a high-profile Republican such as Senator Romney has put his name to the proposal. It may be a sign that the reform conservative impulse, which was temporarily overwhelmed by the rise of political populism, is reinvigorating itself. The refundable child tax credit may be seen in this light as the catalyst for a new, reform-oriented conservative agenda.
Here American conservatives may be able to draw from the experience of Canadian conservatives who have supported different forms of federal child benefits for nearly 30 years. The most recent experience with the Universal Child Care Benefit (UCCB), which was a signature policy accomplishment for the Conservative government led by Prime Minister Stephen Harper from 2006 to 2015, may in particular provide salutary lessons in the current U.S. policy debate. (I served as an adviser to Harper during that time.)
The UCCB started to gain traction as a think-tank idea in the late 1990s and early 2000s. Conservative policy scholar Ken Boessenkool was primarily responsible for advancing the case over several years that Canada’s tax and transfer system shouldn’t be neutral with regard to children. As he put it: “Kids are not boats,” and federal policies, which permitted expensing and deductions for different purposes, ought to cease treating children as if they were the same as a disposable or depreciating asset. Instead Boessenkool argued for significantly increasing pre-existing parental deductions and converting them into a refundable tax credit. The goal was to shift federal policy from a position of neutrality to a clear preference for families with children.
The key insight here is that society has a collective interest in children, but yet the costs of raising children (including the opportunity costs of forgone income and consumption) are typically fully borne by parents. There is scope therefore for public policy to tilt in favor of families with children to recognize the difference between private costs and social returns.
This early work generated interest among a mix of policy wonks and social conservatives, but it mostly eluded mainstream political attention. That changed in 2003 following the establishment of the Conservative party of Canada, which resulted from a merger of the Progressive Conservative party and Reform party, and the selection of Stephen Harper as the Conservative party’s founding leader.
Two factors drove the mainstreaming of Boessenkool’s policy entrepreneurship. The first is that Mr. Harper’s own conservatism and his diagnostic of the emerging political battles of the early 21st century drew him to a pro-family agenda. As he put it in a major 2003 speech: “The truth of the matter is that the real agenda and the defining issues have shifted from economic issues to social values, so conservatives must do the same.” The second is that Canada’s then-Liberal government was starting to develop an intergovernmental system of publicly funded and publicly run childcare that was gaining political and policy traction. There was a political economy imperative therefore for Conservatives to advance a credible alternative.
Boessenkool’s proposal for a refundable tax credit ultimately evolved into a universal, per-child cash transfer for families with children under the age of six in the context of the 2006 federal election. These policy design changes were mostly driven by the goals of administrative and communications simplicity. The latter is especially important: The unofficial campaign slogan was $100 (CAD) per month for each child under age six.
The 2006 election campaign became in part a competition of differing policy assumptions about the government’s role in supporting families. The Liberal party advanced the case for its state-provided model, and the Conservatives argued instead for the benefits of flexibility and choice inherent in its unconditional cash transfers. That nearly 60 percent of families with children under the age of four used a mix of home day care and private arrangements as opposed to more institutional forms of child care buttressed the Conservative party’s message. The pretext was about child care. But it became a proxy for values, the role of government, and the primacy of families.
The Conservative party won the election and ultimately implemented and subsequently augmented the UCCB by slightly increasing its generosity and providing a partial transfer payment for children between ages six and 17. It became one of the most recognizable parts of the Harper’s government nearly ten-year agenda.
What is more interesting though is what followed. The 2015 federal election campaign pitted the Conservative government seeking reelection against the same Liberal party that it had defeated in 2006. This time, however, the Liberal party’s policy platform eschewed its prior support for state-run child care and instead proposed the consolidation of existing federal family benefits (including the UCCB) into a new, more targeted, and generous Canada Child Benefit. It represented a significant policy reversal that broadly accepted the case for unconditional cash transfers to parents that had previously been advanced by the Conservatives. In effect the Conservatives lost in part to their own idea.
But this shouldn’t be interpreted as a partisan comment. The new CCB is a superior policy. It represents a useful set of improvements to the UCCB.
The CCB is non-taxable and adjusted to inflation. It provides $6,639 CAD ($5,041 USD) annually for each child under six and $5,602 CAD ($4,254 USD) for each child aged six to 17. It starts to progressively phase out at household incomes above $30,000 CAD ($22,798 USD) and fully phases out for a family with one child under age six and one above age six at approximately $190,000 CAD ($144,390 USD). The program costs $23.7 billion CAD ($18 billion USD) annually and reaches roughly 3.3 million families.
The CCB has made positive progress on child poverty. Government estimates are that it has lifted about 300,000 children out of poverty since 2016 and contributed to the lowest child poverty rate in Canadian history.
It has also importantly signaled that Canadian policymakers across the political spectrum recognize a role for public policy to support families with children that’s rooted in flexibility and choice. Plans for publicly funded and publicly run child care have essentially been halted. This development in favor of a pro-family agenda represents an intellectual and political victory for Canadian conservatives.
The policy design for such an agenda is reasonably straightforward. The Bennet-Romney proposal represents a good model. McCabe and others have also put forward sensible ideas. The more challenging part is persuading some conservatives that government policy ought to intentionally subsidize families with children.
Canadian conservatives admittedly find this tension within U.S. conservatism a bit hard to understand. We decided kids are not boats a long time ago. The Bennet-Romney proposal should advance a similar debate in the coming weeks and months. It could be a turning point for a pro-family agenda.