Congress will decide this year whether they will extend more favorable taxation on investment by businesses. This is a highly debated issue. The cost of these tax breaks are currently being felt financially today and will impact future generations. Many who argue against them do so because of how expensive they are. Child tax credit should be addressed, now. Why not compare the fiscal costs of tax breaks for children versus business?
Child Tax Credit
Child advocates have called on legislators to make the child tax credit (CTC) fully refundable. This would boost economic growth by allowing companies who invest in their employees’ children with R&D funds. Now companies can count this as revenue reductions with directly related activities like HR or marketing. This investment could lead society at large upwards 3%-5%. How will this help businesses?
Business Expenditures
The tax code has long allowed businesses to expense their qualifying R&D expenditures immediately, which encourages investment in innovation. The 2017 Tax Cuts and Jobs Act changed this longstanding policy. Companies are required to write off these costs over five years beginning next year.
While the child tax credit was deferred until 2022, there were still legislators and businesses that knew about it. They couldn’t predict what would happen. So, in 2021 with ARP Act (American Rescue Plan) made changes to the amount of back taxes allowed. This depended they filed or if their accountants completed some work beforehand. This helped quite a bit but not fully since we want these people’s money!
How About a Compromise?
The compromise bill not only increased the CTC by $2,000 per child but also made it fully refundable. This targeted low-income families since they were the hardest hit with an extension in 2022. If current limits were maintained; this will cost about 16 billion dollars over 10 years (not including any future extensions).
(More information about tax resolution issues, please visit our home page and read the “Mystery is Over” article.
Fairness Required
It’s time to end this unfairness and give more resources back home where they belong! Half of the benefit from full CTC refundability goes towards families in lower income brackets. Another third richer quintiles get their share as well. This is less progressive than what we had before with R&D capitalization. Thankfully, there are plenty who care about making things right again so everyone may enjoy some happiness on both fronts.