Manchin rejects Build Back Better: what does this mean for the Child Tax Credit?

Key moderate Democrat Sen. Joe Manchin has announced that he is not willing to support the Build Back Better bill, the $2 trillion package that is a key part of President Biden’s ambitious legislative agenda.

The bill would have expanded the social safety net and provided a raft of new incentives to promote green energy practices in the United States. It included extra funding for the Child Tax Credit which would have allowed the popular monthly payments to have continued for at least another year.

Manchin always seemed to be the Senate Democrat most likely to split from the party on the Build Back Better bill and he confirmed his decision on Fox News Sunday: “I cannot vote to continue with this piece of legislation. I just can't. I've tried everything humanly possible. I can't get there.”

He added: “I have tried everything I know to do. And the President has worked diligently. He's been wonderful to work with. He knows I've had concerns and the problems I've had and, you know, the thing that we should all be directing our attention towards [is] the variant.”

What now for the Child Tax Credit?

As mentioned, the Build Back Better bill would have extended the expanded Child Tax Credit for another year. Without the bill’s passage the monthly payments that have been in place since July will come to an end after this month’s payment.

The IRS sent out the final round on 15 December and the monthly payments, worth up to $300 per child, have been projected to cause a 40% drop in poverty amongst recipients over the course of a full year. Extending the support was considered a key objective during Congressional discussions but there is insufficient support for the proposals.

The remaining six months of the boosted Child Tax Credit will be available to families to they submit their 2021 tax returns in the new year. Each family’s entitlement will either be used to reduce an outstanding tax bill or to increase the size of a tax refund. The IRS is sending out a Letter 6419 in January to everyone who is eligible for the tax credit, explaining how to claim it.

The Child Tax Credit was a major sticking point for Manchin throughout the talks, with CNN reporting that Manchin had wanted to cut it from the package entirely. Manchin argued that a one-year extension hides the full cost of a programme that is likely to be extended on an annual basis going forward.

Manchin has previously said that any Child Tax Credit boost should be written into legislation as a ten-year extension, so that the long-term cost of the measure is clearly visible. Concerned about overheating the US economy with federal spending, last week Manchin said: "I want to make sure that we're upfront, transparent with the public. That's all."