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Biden’s Phony Child Tax Credit

Biden’s Phony Child Tax Credit

In launching the child tax credit, which sends $300 to parents with children under the age of six and $250 per month for children between 6 and 18, President Biden and Vice President Kamala Harris are bragging to the national media about what they have done for the children of America.

The major address was led off by Vice President Harris – who AGAIN used the “things my mother taught me” schtick.  I mean … we love our mothers, but I would like to think that Harris has been influenced by more than her mother. 

In terms of the purpose of the national address, Harris reached a new level of hyperbole. She suggested that this day was one of those never-to-be-forgotten moments in history.  You know, the kind that you will always remember where you were when you heard the news.  She was comparing this bit of political boondoggling as comparable to Japan bombing Peril Harbor, the assassination of President Kennedy and the attack on the Trade Towers.   To be honest, I already forget what I was doing when I heard the news. 

Of course, you cannot lose politically by giving away money – especially when it is not your money.  So, where will the money be gotten?  Biden says by raising the taxes on corporations and rich people.  Two Problems.  Corporations never pay taxes.  They only collect them and pass them on to the government.  Any tax increase on corporations will be paid by you and me when we purchase stuff.  It is a hidden tax that hits hardest on the poor, who have limited funds to cover the increases in cost of goods and services.

The Biden child gift package will also hit us at the retail counter because pouring money into the economy causes inflation – a rise in prices.  We are already seeing that.  So, the parents who receive the child credit money should remember that they are paying for it through that increase at the gas pump, the cost of a used car and all those other purchases at the grocery and clothing stores.

Biden repeatedly called the child tax credit a tax reduction over and over.  No matter how many times he says it, it is not a tax reduction.  It is no different than the stimulus checks we received that started the over-heating of the economy (meaning inflation).  The so-called Child Tax Credit may have compensated a bit for the taxes parents pay. But it is not a tax cut.  It is not a credit.  And it is not necessarily for the children.

They claim that the child tax credit will lift millions of kids out of poverty.  If you look at the numbers, they are actually offering to lift more kids out of poverty than there are kids in poverty.  Furthermore, there is no guarantee that parents will spend it on the children.  They could spend it on their own costly habits – cigarettes or booze.

Biden said that it would go to a couple earning less than $150,000 dollars and a single parent earning less than $75,000.  That is not exactly poverty level.  And it actually benefits couples much more than  single parents – who is more likely to be at poverty levels.  Why?  Because couples still live in one house or apartment, share utility bills, etc.  Two people living in a house with a $150K income are much better off than one parent in a house – and paying all the utility bills alone — getting half that amount.

Back in the 1960s and 1970s the child subsidy welfare programs incentivized women at poverty level to have more children.  Eventually, limitation place on child support programs mitigated the problem.  The Biden approach of giving away money ostensibly to support children in poverty may well produce a bumper crop of children in poverty.

The final problem is that we just cannot afford the cornucopia of spending that Biden and the Democrats are proposing and doing.  It would appear that they are counting on the age-old Democrat strategy of buying votes with taxpayer money.

We should be mindful of what Benjamin Franklin said.  “When the people find that they can vote themselves money that will herald the end of the republic.”

There is a sad irony in that fact that Biden & Co. are bankrupting the future of the very children they are purporting to help.

So, there ‘tis.

About The Author

Larry Horist

So,there‘tis… The opinions, perspectives and analyses of Larry Horist Larry Horist is a businessman, conservative writer and political strategist with an extensive background in economics and public policy. Clients of his consulting firm have included such conservative icons as Steve Forbes and Milton Friedman. He has served as a consultant to the Nixon White House and travelled the country as a spokesman for President Reagan’s economic reforms. He has testified as an expert witness before numerous legislative bodies, including the U. S. Congress. Horist has lectured and taught courses at numerous colleges and universities, including Harvard, Northwestern, DePaul universities, Hope College and his alma mater, Knox College. He has been a guest on hundreds of public affairs talk shows, and hosted his own program, “Chicago In Sight,” on WIND radio. Horist was a one-time candidate for mayor of Chicago and served as Executive Director of the City Club of Chicago, where he led a successful two-year campaign to save the historic Chicago Theatre from the wrecking ball. An award-winning debater, his insightful and sometimes controversial commentaries appear frequently on the editorial pages of newspapers across the nation. He is praised by readers for his style, substance and sense of humor. According to one reader, Horist is the “new Charles Krauthammer.” He is actively semi-retired in Boca Raton, Florida where he devotes his time to writing. So, there ‘tis is Horist’s signature sign off.

9 Comments

  1. Ben

    “Most parents know when you file your taxes, you get a child tax credit – a deduction for each of your children.

    Well this is an advance on that money for this year’s taxes.

    You’re going to get half of it now – in real time, paid monthly. “

    I thought you Republicans were all about less taxes. This is an increase in decreasing your tax burden. What’s not to like?
    With the exception of perhaps that poor people are reducing their tax liability, I would think that this is a good thing that everyone can agree upon.
    I guess not.

    Reply
    • Dan Tyree

      Ben I agree with you on this one. I must be going crazy

      Reply
    • larry Horist

      Ben. I have come to the conclusion that you have not learned much in life. This is not an advance on next year’s tax credit, it is in addition. It is free money that can be spent for anything. It is not a tax decrease but just more money — which arguably could make it easier to pay taxes. But most of that money will be spent long before the next tax season. And if it is used on taxes, it will not benefit the children, as promised. There is no reduction in tax liability. Also putting billions of dollars more into the economy at this time is inflationary. You can see by the 10 percent rise in prices — and some a lot more — we already over stimulated the economy with the last checks. So, you give some folks a bit more money and then you take away some of it with inflation. Right now incomes are rising slower than inflation — and that means the average person can not purchase as much. Democrats predicted that there would be no inflation. Then they said it would be very mild. it is now passing mild — so they say it is not about the liquidity in the market but a response to bringing the economy back. Makes no difference … more money poured into the economy … more inflation. It is the old supply and demand thing. More money than demand and prices go up. Democrats love inflation because people want more and bigger government to help them — not realizing that they are asking for the same narcotic that is causing the problem. And yes Dan, you must be going crazy.

      Reply
      • Ben

        Larry,
        I provided you a quote that that clears up your misconception. This is an advance on the increased child tax credit. Which does lower your taxable income. It used to be $1500 per child, now raised up to $3,000 per child. In the past we have used this child tax credit to lower our taxable income. It was great when all 4 kids were under 17… now it’s still nice.
        I found many articles explaining this in plain English , but only two that explained it in republicaneese. Incredibly, both were yours. I found a second site that you spew Republican talking points.

        If wages aren’t keeping up with inflation, it may be time to talk about raising wages.
        Obviously the Democratic law makers underestimated the inflation. Kinda of like trump over estimated that the tax cuts would pay for themselves instead of adding a trillion dollars to the debt. Obviously politicians don’t always get it right. Kind of like you.

        Reply
    • thinkr2

      Ben, there is a big difference between a credit and a deduction. Which is it? You use both terms for the same thing.

      Reply
      • larry Horist

        I will save Ben the time to look it up. He obviously did not know. A tax credit is like a payment in which the tax payer gets the full value of the money — like the checks being sent out by Biden. It is a reduction of the amount of tax you were to pay. A tax deduction is a reduction of the taxable income and the benefit is only how much of the deduction you do not have to pay tax on — and it depends on your tax bracket. It actually benefits the those in the highest tax brackets the most. Biden is not giving a tax credit because it is going to folks how do not pay taxes in addition to those who do. A mother with two little kids would get $7200 a year even if she were at a no tax level. In fact, very few poor folks would even pay $7200 per year in taxes. Biden’s label is a political lie.

        Reply
  2. frank stetson

    Again hats off on a nice piece. I don’t totally agree, but you are not crazy IMO.

    First, Biden/Harris’ family should be used sparingly, not a song played too often. Kamilla better shift gears, enough is enough. It’s a big moment, given how many lifted out of poverty, but still —- not 12/7 worthy, that’s just chest thumping.

    As to the money – we need an economist, none of this stuff is as simple as you suggest. Will corporations pass on the tax via price? My favorite economic answer: it depends. I match your “customer gonna pay” with “price stickiness,” as whether prices rise, stay the same, or even fall. Odds in you favor but guarantee there is no direct line from cost to price, just a sticky relationship.

    Inflation: here I am with you 100% however not because of this alone, because of everything. At it’s core, inflation is people with too much money. This credit does not create any new money, not a penny. It just changes who spends it, the government spends every penny, people will not spend every penny. Most of these people will not have too much money, they will not save much either. Some will save some taking money out of the system, the government never saves.

    Totally disagree with your credit assumption. It is a tax credit and therein lies the rub. Effectively what we did, as noted above, is take money out of the government’s pocket and put it in the parents’ pocket. However, wanna bet the tax pocket gets filled up again even if not from higher corporate tax? If the government does not get the increased corporate tax, ti will create money to cover the loss and balance the budget. If the government takes a loan to pay the credits, that’s an inflationary story for sure.

    Let me tell you a story about a great President who took a $1.7T stimulus with no inflation. Obama invented and offered higher bank reserve interest and the entire stimulus ended up being parked in savings, floating our debt, and thus, no inflation. Of course, it looms to this day with the potential to sink us all.

    Theoretically this credit will lift many out of poverty but agree 100% there’s no clue as to whether spent on kids or not so won’t know the theory’s validity for a year. Will guarantee not 100% spent on kids if for the savings, some will probably be tucked away, especially at incomes of 100K and above. As to exact number of kids, all in the noise, there’s always stuff in the cracks. As to income, sure seems really high to me. Course, so did all the stimulus checks. I felt ashamed so gave mine away.

    Finally, your “The final problem is that we just cannot afford the cornucopia of spending that Biden and the Democrats are proposing and doing. It would appear that they are counting on the age-old Democrat strategy of buying votes with taxpayer money.” No joke, but who went first — Democrats or Republicans? And which people are better winners, business and the very rich or just plain folk? The Trump tax cuts skewered me just because I live in NJ, a geographic tax target brilliantly exorcised by the tea party, took em over a decade to figure how to do something. Almost as good as Session’s fuck the tiny children at the border, it makes good press plan. The bottom line is both parties pick winners and losers, buy votes, and increase the deficit and debt as if on drugs.

    Only Reagan significantly simplified tax code and while I did not agree with the rest of his fiscal malfeasance, that was a beautiful thing to see that every other President has made worse – both sides, even Bush I and Obama.

    To me, in general, it’s not so much the spending, as it is the value and return on investment. Kids are a great long-term investments, especially ones above poverty. I am all for a hand-up, much less so for a hand out. Short term, this is a hand up, longer term it’s a hand out. Put a timer on it at least. Then, create a real program or raise the minimum wage, but quit putting a band-aid over a cut that should be stitched.

    Bottom line Larry, don’t think any of us can forecast what will happen. Too complex. I bought 5-year CDs on Obama’s stimulus figuring inflation. Really screwed the pooch on that one :>) Course then again, in 2008 did the same thing with Wachovia at 5% and rode out the Great Recession fat, dumb, and fiscally happy.

    Reply
  3. larry Horist

    Great response. I do not mind disagreement, especially when it is intelligent. Sometimes I find I was mistaken … and learn. That is why I like dialogue. I was actually educated as an economist — and it has been useful in my career. But I am more like the lawyer that finds his education beneficial at times but does not actually practice law as a profession. As far as being crazy, the jury is still out on that one.

    I disagree slightly. A credit does not have to create new money, but it can if it adds to the amount of money being created. The so-call Child Tax Credit is not the only inflation driver, but it is in the deck.

    I liked you line “the government never saves.” Ain’t that the truth. But it basically has only two ways to fuel its accelerated spending … tax and borrow. Excess in either category tends to have negative repercussions. You argue that a tax credit is simply takes money out of the government’s pocket and puts into ours. But you missed you own good point. The government does not have a “pocket.” That implies savings. Every government expenditure requires taxation or borrowing. If we increase spending, we either increase taxes or borrowing.

    In terms of Obama, you are talking about a much smaller deal, only(?) $1.7 trillion. Also, there was a lot of pent-up demand — more product than money. Today, the economy is awash in money — more money than demand. Ergo inflation. Our earlier stimulus checks were beneficial because the shutdown created a short term excess of demand over money — similar to the Obama situation. The later stimulus check was arguably not needed to stimulate. In my judgment, that was the beginning of inflation. Personal savings is important, but it does not mean that money is out of the economy. Until a person spends their savings, they have “loaned” it to someone who is using it — banks, etc.

    In terms of the Trump tax cut, it was an even deal across the board in terms of rate changes. The personal income of the rich suffered a bit more from some loophole closings. — but way not enough. As later reports clearly showed, it was the loopholes that enabled billionaires to pay no personal tax. It had nothing to do with rates. Democrats misstate the decrease in “corporate” taxes as a reduction for the rich. That is simply not true. It tends to create jobs, which is good across the board. An increase in corporate tax never touches the income of the rich … or anyone else working for the company. When the corporate tax goes up, no executive suffers a loss of income from the corporation. Tax reductions on corporation almost never improve the salaries of executive — although in rare cases, one could argue that the money may go into bonuses … but that is uncommon.

    You need to remember that Reagan’s economic polices pulled us out of one of the worst inflations of our lifetime and produced a strong economy that lasted for the better part of 20 years. One of my praises of Bill Clinton is that he maintained Reagan economic policies and did not screw up the economy like those on the left want to do.

    I do not see Biden’s so-called tax credit as doing much for the kids. To focus in on just one issues, what is the benefit to a black kid in a segregated community in a big city to have more money spend on his or her behalf — if it is — and then send them off to a second-rate school where they will not get a career-level education that will get them to college? In this one, I think Biden is spreading around fairy dust.

    Finally, corporations do not pay taxes. Analysis of corporate tax cuts and increases are generally absorbed into the balance sheet. It is true that tax cuts are less likely to produce drops in prices since the money is being invested in capital expansion (equipment and jobs), but tax increases virtually always result in a price increase – maybe deferred a bit for competitive advantage. You just need to look at profit margins AFTER a tax increase. They are usually maintained. So, how can that be? We see it more obviously in things like gasoline and cigarettes. Though less obvious, it is the same for the price of milk and shirts.

    The minimum wage is a progressive canard that has never achieved any of its promised goals. It sounds good on the surface, but produces no lasting – or even current – economic benefits. It is not even helpful to the workers who receive it in the long run. In other words, it is a short term benefit to a very small percentage of the workforce for a short period of time. Explaining all the “whys” is a bit too complicated of this response… but I have written several times on the subject. Maybe another time.

    You are correct that the economy is a very complex thing — and while there are some fundamentals there is too much complexity to make absolute predictions … too many moving parts. That is why the expert economists can have such differing views. But we still should be able to get around some of the myths.

    Thanks again for a very thoughtful response.

    Reply
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  1. Oh yes Larry! A man of your stature, at this stage of your life, dedicating an entire paragraph to refuting…