Lawmakers Consider New Expansion of Child Tax Credit

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A Democratic proposal to extend the child tax credit for one year could give qualifying families up to $ 300 per child per month.

But like all direct payments made by the government as part of Covid relief, some wonder if the aid will be too much or too little.

One of the strongest objections to the Democrats’ proposal came from Sen. Marco Rubio, R-Florida, who wrote in an op-ed this week that “it is not pro-family policy, no matter how much the Democrats claim it “. be be.”

The expansion of the child tax credit is aimed at reducing child poverty. Research has indicated that President Joe Biden’s plan could help cut the current rate in half, particularly for minority families.

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Still, others like Rubio are skeptical.

“If lifting families out of poverty were as simple as handing a check to moms and dads, we would have solved poverty long ago,” Rubio wrote.

As with other direct payments, such as stimulus checks, the debate over how the child tax credit is structured has centered on whether those who are most financially disadvantaged will actually benefit.

Some experts say the Democratic plan could also enrich those at the top of qualified income thresholds.

How the Democrats’ Child Tax Credit Would Work

The child tax credit helps parents who are below certain income thresholds to support their children financially.

Today, it rises to $ 2,000 per child for those who earn up to $ 400,000 if they are married and $ 200,000 if they are single.

Because it is a tax credit, it allows parents to reduce their federal tax liability. (This should not be confused with a deduction, which reduces adjusted gross income.)

The House Democrats’ proposal, released this week, calls for increasing the credit to $ 3,600 per child under 6 years old, and $ 3,000 per child up to and including 17 years old.

The bill would make it possible for families to choose to receive monthly payments, rather than having to wait for a lump sum at the end of the year. Families can receive up to $ 300 per month for a child under 6 and $ 250 per month for a child 6 to 17 years old.

Eligibility for more complete payments would be based on income. Therefore, single parents with adjusted gross income of up to $ 75,000, heads of household with up to $ 112,500, and married couples filing jointly with up to $ 150,000 would qualify.

Credit would be phased out for those earning above those levels, where it would drop and then stabilize at $ 2,000 per child. It would be capped for individuals with $ 200,000 in income and couples with $ 400,000, the same thresholds in effect for credit today.

“The idea is that the current $ 2,000 that people receive per child is still being eliminated in the same way,” said Steve Wamhoff, director of federal fiscal policy for the Institute for Fiscal and Economic Policy.

Credit protection for those earning up to $ 400,000 is also in line with Biden’s campaign promise not to raise taxes for people earning below that income level.

Why Lower Income Households Would Benefit

The legislation also aims to change existing rules so that lower-income families can access credit.

To do that, it removes the $ 2,500 minimum income requirement and makes the credit fully refundable. That would give access to families that currently do not receive credit or receive reduced credit.

“That represents a pretty big shift, I think, in the objective of what credit was trying to do,” which is to help working families, said Garrett Watson, senior policy analyst at the Tax Foundation.

Estimates have found that such a shift could lift 9.9 million children almost or completely above the poverty level. Many of the children who would benefit would be Latino, African American, or Asian American.

However, some conservatives have spoken out against the proposals.

Sen. Mike Lee, R-Utah, (left) and Sen. Marco Rubio, R-Florida, at a press conference on Capitol Hill on March 4, 2015 to present their proposal for a revision of the tax code.

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Rubio and Sen. Mike Lee, Republican of Utah, issued a joint statement this month asking Congress to expand the child tax credit without “undermining the responsibility of parents to work to support their families.”

“We do not support turning the Child Tax Credit into what has been called a ‘child allowance,’ which is paid as a universal basic income for all parents,” said Rubio and Lee. “That’s not a tax break for working parents; it’s welfare.”

Together, the senators have presented an alternative proposal to increase the credit to $ 4,500 per child under 6 and $ 3,500 for older children. However, work would be a key requirement in the plan.

However, other experts argue that the key point of the Democrats’ plan is to make money more accessible to families to help fight poverty. Therefore, linking profit to income would be counterproductive.

“Is the goal to reduce child poverty or not?” Wamhoff said. “And if that’s the goal, then you provide assistance to families with children. It’s pretty straightforward.”

But since parents who are below the same income threshold of $ 150,000 for married couples can also receive full stimulus payments of $ 1,400 for both themselves and their children, many families could have a great payday if the current coronavirus relief package.

In total, some families could qualify for up to $ 10,000 in direct payments, estimates Bill Hoagland, senior vice president of the Bipartisan Policy Center.

“I think we have to do something,” Hoagland said. “But I think there needs to be better targeting and coordination here between direct payments and the child tax credit.”


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