American Exceptionalism Revisited: Tax Relief, Poverty Reduction, and the Politics of Child Tax Credits

Joshua McCabe,Elizabeth Popp Berman

doi:10.15195/v3.a24

Joshua McCabe, Elizabeth Popp Berman

Open Access

https://doi.org/10.15195/v3.a24

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Abstract

In the 1990s, several liberal welfare regimes (LWRs) introduced child tax credits (CTCs) aimed at reducing child poverty. While in other countries these tax credits were refundable, the United States alone introduced a nonrefundable CTC. As a result, the United States was the only country in which poor and working-class families were paradoxically excluded from these new benefits. A comparative analysis of Canada and the United States shows that American exceptionalism resulted from the cultural legacy of distinct public policies. We argue that policy changes in the 1940s institutionalized different “logics of appropriateness” that later constrained policymakers in the 1990s. Specifically, the introduction of family allowances in Canada and other LWR countries naturalized a logic of income supplementation in which families could legitimately receive cash benefits without the stigma of "welfare." Lacking this policy legacy, American attempts to introduce a refundable CTC were quickly derailed by policymakers who saw it as equivalent to welfare. Instead, they introduced a narrow, nonrefundable CTC under the alternative logic of "tax relief," even though this meant excluding the lowest-income families. The cultural legacy of past policies can explain American exceptionalism not only with regard to CTCs but to other social policies as well.

Highlights

In the 1990s, several liberal welfare regimes (LWRs) introduced child tax credits (CTCs) aimed at reducing child poverty
Process-tracing, which attempts to follow the chain of events linking cause and effect, allows us to build support for our alternative explanation: that the availability of a “logic of income supplementation,” which was a legacy of family allowance policies, led policymakers in most LWR countries to see refundable tax credits as an appropriate, nonstigmatized way to help families, while in the United States, tax credits were forced into a dichotomy in which they were seen either as a benefit for taxpayers or, if refundable, as akin to welfare
The commission noted that “[t]he United States is the only Western industrialized nation that does not have a child allowance policy or some other universal, public benefit for families raising children” (National Commission on Children 1991:94) and, like Steuerle and Smeeding, framed its proposed CTC as a pro-work alternative to income support programs: Because it would assist all families with children, the refundable child tax credit would not be a relief payment, nor would it categorize children according to their “welfare” or “nonwelfare” status

Summary

Introduction

In the 1990s, several liberal welfare regimes (LWRs) introduced child tax credits (CTCs) aimed at reducing child poverty. Focusing on the “most similar” (George and Bennett 2005) cases of Canada and the United States, we demonstrate that the former’s historical legacy of family allowances institutionalized a logic of “income supplementation for families” that enabled Canadian policymakers to extend the benefits of child tax credits to all children.

Results

Conclusion