Will the Child Tax Credit be extended to 2025?
House Democrats announced additions to the $3.5 trillion reconciliation package, regarding the Child Tax Credit, health care, and climate change.
After just one child tax credit payment was sent in July, 3.3 million children were lifted out of poverty.
Nearly 90 percent of families in the United States with children received the credits worth $300 for children under six and $250 for those between the ages of six and seventeen.
The value of the credits is not so high that one would expect that it could make such an impact. These new findings show just how a few hundred dollars can mean the difference between keeping food on the table and ensuring the basic needs of children, and their parents, are met.
Late this week, the House of Representatives Ways and Means Committee released a statement informing the public that lawmakers have decided to include an extension of the credit's current structure through 2025.
After seeing the success of the program after just one payment, many legislatures are eager to have this extension passed. These payments will become increasingly important in the coming months as more than millions of households may see their incomes plummet as federal unemployment programs and the eviction moratorium expire.
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What other measures have been included?
The announcement regarding the Child Tax Credit extension also included details on many other measures lawmakers had revised in the three trillion dollar package
Tax Credits and Benefits
In addition to the extension of the Child Tax Credit, the Ways and Means Committee announced that they would also extend the “American Rescue Plan expansions of the Earned Income Tax Credit and the child and dependent care tax credit.” These benefits led to larger returns for many taxpayers in the United States. As the economic recovery continues, supporters of the bill see it as important that these benefits are maintained to spur spending to avoid economic contraction.
The bill would also expand tax credit programs that have been proven effective in encouraging investment in affordable housing. In recent years the housing market in the United States has exploded, and more and more people are finding themselves priced out. These tax credits would encourage the construction of more affordable housing units, and with greater supply, the market could see a decrease in the price.
Health Care and Prescription Drugs
Other key details of the reconciliation bill relate to the price of prescription drugs.
Patients in the United States pay the highest prices for prescription drugs. The reconciliation bill could lower prices by allowing the Secretary of Health and Human Services to negotiate with drug companies.
The bill would also provide “immediate coverage for Americans in the Medicaid coverage gap.” The Medicaid gap refers to individuals living in states that opted not to expand Medicaid after the passage of the Affordable Care Act.
In 2016, the Kaiser Family Foundation found that as many as three million people were unable to access health insurance because their state had rejected federal funds to expand Medicaid. These federal funds could help close the gap. Additionally, the Ways and Means Committee announced that the bill would also build upon “American Rescue Plan’s expanded premium tax credits to help lower health insurance costs.”
Will the bill gain the support necessary to pass?
Supporters of the bill were feeling more optimistic about its passage before Senator Joe Manchin argued that a “strategic pause” should be taken in the negotiations.
The West Virginia Senator’s vote is needed to pass the legislation as Democrats will use the reconciliation process to make these new benefits law. Senator Machin has stated that he will support a package of this nature if it is fully paid for -- which in its current form it is. However, Manchin disagrees with some of the tax increases and fees that would cover the costs of the new spending.
The pause was mentioned in an opinion piece in The Wall Street Journal where Manchin argued that he disagreed with “some in Congress [who] have a strange belief there is an infinite supply of money to deal with any current or future crisis, and that spending trillions upon trillions will have no negative consequence for the future.”
However, many economists disagree with Manchin.
For decades, the United States allowed fear of deficits to dissuade lawmakers from passing significant legislation that could bolster the social safety net or make targeted investments in education, infrastructure, and other public goods. Some economists believe that running a large deficit can take its toll on the economy, where the investments are targeted matters greatly.
In December 2020, the Atlantic’s Annie Lowrey wrote that perspectives on the debt to GDP ratio were changing.
After speaking with economic policy expert Larry Summers she wrote that in the coming years, the US should focus on what is spending money on and “figuring out how to get more bang for the government’s buck.”
Summers told Lowery that before the economy had seen a sustained period of low interest rates, many in Washington often emphasized keeping close tabs on the “national debt and the budget deficit, and the burden it was placing on future generations.” However, since the pandemic began and the federal government began making investments in food assistance, direct payments, and unemployment insurance, the perspective of many economists is shifting; Summers argued that the “policy debate needs to be about the composition of fiscal policy, not the level of the deficit or surplus.”
The investments the federal government made during the pandemic through its three major stimulus bills have shown many that investments of this nature can yield greater returns compared to “write-offs for business meals, tax breaks, and the like.”
A hearing to discuss the details of the reconciliation bill and how it fits into President Biden's Build Back Better agenda is scheduled for 14 September.