The pandemic-era Expanded Child Tax Credit, a Biden Administration program that provided parents with up to $300 to $350 in additional monthly income, lifted almost four million children out of poverty. Despite the program’s resounding success (and bipartisan support), it ended in part due to partisan politics at the end of last year, leaving millions of families to struggle beneath a floundering economy and budget-breaking inflation. But will there be a Child Tax Credit for 2023?
Recently, there have been murmurs that the lame-duck Congress — what Congress is referred to in that period between midterms or an election and the inauguration of the new representatives — could enact, once again, new expansions to the program before the new Congress is inaugurated in January. This would matter a great deal because that tax credit, practically as soon as it expired, left as many as 3.7 million kids to fall right back into poverty.
But how could a child tax credit plan be revived? Is it likely to happen? And when would it happen?
What Was the Expanded Child Tax Credit?
First, it’s important to note The Child Tax Credit (CTC) has existed for some time, albeit in different forms. Prior to Biden’s 2021 American Rescue Plan Act, the CTC was an income tax credit that traditionally provided families that file taxes with credits of up to $2,000 per child on their taxes. The credit was always non-refundable, though, meaning that families under certain income thresholds and those with no income were unable to benefit from the credit, leaving out the poorest families.
As part of his American Rescue Plan, President Biden expanded the CTC, making it fully refundable so that families of low incomes could qualify, and increasing the total value with part of the credit paid out in monthly installments for roughly $300 per child and the second half of the payment claimed on income taxes. The program was paid out from July 2021 to December 2021, and families could receive a total of up to $3,600 per kid.
The program was overwhelmingly beneficial for families in need, allowing for the purchase of basic necessities, paying rent, or saving for emergencies. It stabilized budgets, slashed child poverty and hunger, and even helped the mental health of beneficiaries. Even upper-middle-class recipients used the cash on the basics.
Late in 2021, despite efforts by Democrats, plans to extend the monthly payments were stonewalled by Congressional Republicans and Democratic Senator Joe Manchin and Kyrsten Sinema, the former of whom wanted to tie the program to a work requirement.
Will There Be an Expanded Child Tax Credit in 2023?
The short answer is maybe. Vox reporting suggests that Senate Democrats, under the wire, are trying to squeeze in a “more modest” expansion of the child tax credit, or even make a distinction in tax credits between infants and toddlers vs. all kids under 18.
As for now, Congressional Democrats have the upper hand in negotiations — and the backing of many organizations — at least until January when the new Congress is seated. And there is something Republicans want legislatively, maybe enough to consider rolling back their opposition to changes to the CTC.
Historically, corporations have been able to deduct the cost of research and development for the year the R&D was performed. A Trump-era tax rule changed that. For the last several years, corporations have been required to spread those deductions over a 10 to 15-year period. The Trump-designed rule expires this year, and Republicans are anxious to reinstate the every-year deduction standard.
Analysts agree that if Democrats scale back on a few of their demands regarding the CTC and get on board with the R&D deduction, a compromise that benefits families might be possible.
What Would the New Child Tax Credit Look Like?
Democrats initially hoped to not only permanently increase the amount of the CTC from $2,000 per child to the up to $3,600 per child allotted as part of the Expanded CTC, but also ensure that the neediest families were able to benefit.
Vox analysis suggest that Democrats could agree to maintain the current $2,000, potentially with no monthly payments, and agree to reinstate the R&D yearly deduction to ensure that all families qualify for the CTC, not just those with income high enough to require filing taxes.
Senate Democrats have both the negotiating power and the momentum to make changes to the CTC. “I’ll put it this way, no more tax breaks for big corporations and the wealthy unless the child tax credit’s with it. I’ll lay down in front of a bulldozer on that one,” Democratic Senator Sherrod Brown, who is chair of the Senate banking committee, told the Washington Post in September.
Is Expanding the Child Tax Credit Likely?
Over the summer, a handful of Senate Republicans, including long-time Utah Senator Mitt Romney, introduced their own version of the CTC. But unlike the Democratic vision of the credit, it excluded low- and no-income families by requiring at least $10,000 in yearly income to qualify — which ultimately means Democrats are unlikely to go for it. It also slashed other social programs to “pay for” the plan, in a move that would lessen the impact of the cash overall on child poverty.
“We’re talking to Republican offices that say they want to do more for families than current law provides, and when we say, ‘What’s your bottom line in terms of what you can or can’t accept?’ they say, ‘Well, I don’t know, it’s a deal,’” Adam Ruben, director of the advocacy group Economic Security Project Action told Vox. “They don’t say, ‘It has to absolutely do this,’ or has to be written in a certain way. It’s all more fluid in Congress right now than that.”
So, although it might not look like the pandemic-era Expanded CTC, chances are very good that the two parties can come to a consensus that at least benefits those who need it most.