Will $3,600 Child Tax Credit arrive with third stimulus or fourth?
The American Rescue Plan enhanced the Child Tax Credit for 2021 fiscal year, but there are calls to make it permanent as part of the Build Back Better plan.
President Joe Biden will address a joint session of Congress 28 April where he is expected to announce the third part of his Build Back Better. Despite lawmakers urging to make the changes to the Child Tax Credit for 2021 permanent, they may have to settle for a temporary extension.
Families are eagerly waiting for the monthly direct payments to begin that were included in the American Rescue Plan as part of the 2021 Child Tax Credit. The Internal Revenue Service chief says that the agency is on track to start those payments in July.
American Families Plan to include multi-year extension of $3,600 Child Tax Credit
President Biden will lay out his vision for the American Families Plan, which will focus on social spending for child care, universal pre-K, free community college and paid family leave. Included in the spending and tax package will be a four-year extension of the changes made to the Child Tax Credit for 2021. The White House is looking to fund the raft of measures through tax hikes on wealthy Americans and investors.
Child Tax Credit expected to reduce childhood poverty by half
The expansion to the Child Tax Credit will benefit round 27 million children. The earnings floor was removed in the 2021 enhancement of the credit opening eligibility to millions of low-income families. The Center on Budget and Policy Priorities calculates that 9.9 million children would be lifted above or closer to the poverty line. This includes children in families that have been particularly hard hit by the pandemic and its related economic harms, disproportionately children of color.
The new system provides a refundable tax credit of $3,000 for children aged from 6 to 17 and $3,600 for children who are under the age of six for the 2021 fiscal year. Starting in July, families can opt to have half the credit sent in monthly installments as direct payments similar to how the stimulus checks which have been so popular during the pandemic. Or families can wait until 2022 and claim the lump sum as part of their tax refund.
House Democrats push to make the changes permanent
As the White House works out the details of the American Families Plan to be presented on Wednesday Congressional Democrats are pushing to make the changes to the credit permanent. In a meeting last week, Democratic Representative Suzan DelBene of Washington, who serves on the Ways and Means committee, told CNN that she spoke with Biden's chief of staff Ron Klain on the issue.
"I think the expansion in the American Rescue Plan was so important, but we're not going to lift children out of poverty in just a year, which is why it's important that we have policy that helps families out for the long run," DelBene told CNN.
Another voice is Connecticut Democrat Representative Rosa DeLauro who chairs the Appropriations Committee and has been advocating for similar legislation since 2003 telling CNN "I believe it is for me it is the most transformative economic endeavor that we could be engaged in."
Chuck Marr, the senior director at the Center on Budget and Policy Priorities calculates that the measure would cost about one trillion dollars over ten years. The White House and Democrats are looking for ways to pay for the policy. House Ways and Means Committee Chairman Richard Neal told CNN "The President took on a bit of a different position. We are trying to figure it out. They are open to us finding the revenue. We will have to wait and see.