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Democrats Introduce $3,600 Per Child Tax Credits in COVID Relief Bill

by
Bob Mason
on
2/18/2021
Democrats Introduce $3,600 Per Child Tax Credits in COVID Relief Bill

Included in President Joe Biden's proposed $1.9 trillion Covid-19 relief package is an impactful child poverty relief bill designed to provide at least $3,000 per school-aged child and $3,600 for children under the age of six to millions of American families. The full benefit of the program would go to single parents earning up to $75,000 and to married couples earning up to $150,000, while the payment would gradually phase out for those families earning higher amounts.

The bill, known as the enhanced Child Tax Credit bill, is currently under consideration in the House of Representatives, where it was unveiled by Representative Richard Neal of Massachusetts, Democrat and chairman of the Ways and Means Committee. Speaking of its purpose, Representative Neal said, "The pandemic is driving families deeper and deeper into poverty, and it's devastating. We are making the Child Tax Credit more generous, more accessible, and by paying it out monthly, this money is going to be the difference in a roof over someone's head or food on their table.”

The updated version of the Child Tax Credit contains several significant improvements. Not only does it increase the previous payment, which had been up to $2,000 per child under the age of 17 with no additional amount for younger children, but the existing Child Tax Credit is paid out in a single lump sum at tax time. It phases out for single parents with a modified adjusted gross income over $200,000 and $400,000 for married couples. According to an estimate by the non-partisan Tax Policy Center, in 2020 about 90% of families with children will receive an average credit of $2,380.

If passed, the more generous enhanced version is slated to be paid monthly, which would allow families greater flexibility to use the funds to help defray everyday living expenses. The payments would be fully refundable, which is not the case now. This would represent a marked expansion of the program and would allow low-income families to get the full benefit. It had previously been unavailable to them because they earned too little income and therefore received either no tax credit or only a portion of the credit that higher income families received. 

If the terms of the enhanced Child Tax Credit bill remain and the stimulus bill is passed, it is anticipated that the first payments would be distributed in July and continue being paid through next June, though separate legislation has been introduced by Reps. Rosa DeLauro of Connecticut, Suzan DelBene of Washington and Ritchie Torres of New York proposing using the enhanced benefit as a permanent replacement for the previous version.

In a statement provided to cable news channel CNN, Representative DeLauro said, "We cannot stop here. We must use this moment to pass the American Family Act and permanently expand and improve the child tax credit. One year is not enough for the children and families battling not just the coronavirus, but poverty, too." The Connecticut Democrat has made improving the child tax credit a goal since 2003.

The bill is far from bipartisan, but does have some Republican support, and a similar proposal has been suggested in the senate by Utah Republican Mitt Romney, who proposed an even-more generous monthly cash benefit last week. He suggested payments of $350 (totaling $4,200 per year) for young children, and $250 (totaling $3,000 per year) for school-aged children. Romney’s plan would be more budget neutral for the federal deficit than the one suggested in the house, as it would trigger the elimination of the Temporary Assistance for Needy Families program and make some changes to the Earned Income Tax Credit, state and local tax deductions, and other government assistance programs.  He estimates the cost at about $66 billion and says it would eliminate poverty from the lives of nearly 3 million children. 

Relief for low-income families and fighting poverty is one of the primary goals of President Biden’s proposal to augment the Child Tax Credit through the COVID relief package, which would also provide an additional $1,400 in stimulus payments to qualified taxpayers and boost aid for unemployment, housing, and nutrition. While speaking last month before signing two executive orders that supplemented federal worker protections and nutritional assistance, he pointed out that if passed his program would have a profound impact in minority communities, cutting poverty among Black families by one third and among Hispanic families by almost 40%. He said, "All told, the American Rescue Plan would lift 12 million Americans out of poverty and cut child poverty in half. That's 5 million children lifted out of poverty." He is also asking for the Earned Income Tax Credit to be expanded so that it would help low-income workers. The non-partisan Committee for a Responsible Federal Budget has projected that the expansion would have a price tag of approximately $120 billion.

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Bob Mason

Bob Mason

Bob Mason is the founder of Coast Financial Services Inc. servicing both the Santa Cruz, and San Jose areas. Bob Mason is a skilled financial professional who is fully equipped to assist any of your accounting needs. Founding his firm in Santa Cruz, Bob understands the importance of small businesses and how they form the backbone of the area. Coast Financial Services, Inc. has been dedicated to the growth and profitability of businesses in Santa Cruz for 17 years. To learn more about Bob Mason and the rest of his team, visit their website.

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