President Joe Biden may highlight the benefits of a planned social spending package in his State of the Union address on Tuesday.
Last year, Biden proposed extending the enlarged child tax credit, which provided eligible families with monthly payments of up to $300 per kid. Since the payouts were only permitted for 2021, the checks were suspended in January.
Democrats have so far failed to gain a simple majority to enact the Build Back Better package, which would increase the maximum credit to $3,600 for children under the age of six and $3,000 for children aged six to seventeen.
Families that qualify for the increased benefit may receive more money when they file their taxes this year, as only half of the total child tax credit was distributed via monthly installments last year. The credit has been reduced to $2,000 per child for 2022, with no monthly payments.
The expansion of the child tax credit may be revisited by Washington politicians. However, the modifications they make could be very different from the aid that was put in place last year.
The Build Back Better plan recommends making the child tax credit completely refundable, allowing even low-income families to take advantage of the benefit.
According to the Tax Cuts and Jobs Act of 2017, the credit phased in at 15% of earnings over $2,500 prior to the implementation of the enhanced child tax credit. According to York, every $1 beyond that threshold is matched with 15 cents of the child tax benefit.
As per the Center on Budget and Policy Priorities, the full refundability provided through Build Back Better, combined with the larger total payments per kid, could cut child poverty by more than 40%. 87 percent of that would be accounted for by full refundability.
According to Columbia University research, since the monthly child tax credit payments halted, 3.7 million children fell into poverty. However, other senators, including Sen. Joe Manchin (D-WV), have stated that the credit should be tied to job requirements. Sen. Mitt Romney, R-Utah, is working on a proposal for a child tax credit with work restrictions that he hopes would gain bipartisan support. Adding work incentives has been criticized by several experts.
According to Elaine Maag, a senior fellow at the Urban-Brookings Tax Policy Center, the first question individuals should ask is whether the extended credit is intended for adults or children. Furthermore, “piling onto a terrible situation” would be “piling onto a bad scenario” if parents lost their jobs and hence their income as a result of an increased child tax credit, she said.
According to Shai Akabas, director of economic policy at the Bipartisan Policy Center, lawmakers might divide the difference by making one component entirely refundable and available to all parents, and the other part phased in with income. The Bipartisan Policy Center has come up with its own middle-of-the-road approach in the hopes of promoting a policy that both parties can agree on.
According to Akabas, any new credit enacted will most certainly be less generous than the one that was put in place temporarily last year. Furthermore, the timing of a future expansion of the child tax credit is uncertain. Before the November midterm elections, lawmakers may try to get something done. Changes to the child tax credit may, however, be grouped in with provisions known as extenders, which are reviewed each year. For parents, this will likely imply a longer wait before any monthly payments resume.