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Democrats Want to Dramatically Expand—and Transform—the Child Tax Credit

Here's how their current proposal could cut child poverty in half.


You’ve probably heard about Joe Biden’s $1.9 trillion COVID-19 relief plan by now, legislation that would fund additional economic aid payments, faster vaccine distribution, mandate emergency paid leave for millions, extend additional unemployment benefits, and provide billions to struggling state and local governments, among other provisions.

But for many parents, the most interesting provision of the plan was the expansion of the child tax credit, which would give more parents more money for their kids, and help ease the costs of raising children. The United States is notorious for not providing benefits to American parents among developed nations — ranking behind far less affluent countries when it comes to helping out their next generation of citizens.

The Washington Post has reported that senior Democrats, for their part, are about to introduce legislation on how to give parents a monthly cash benefit — and cut child poverty by half.

How much would the new tax credit be?

The current version of the plan would set the tax credit at $3,600 for each kid under six years old and $3,000 for those aged six to 17. There is no information on whether or not that benefit maxes out for large families.

How will the money be disbursed?

Even more than the amount, one of the biggest changes in this new tax credit would be how it’s distributed. Instead of receiving it when they file their taxes, parents would receive their tax credit as monthly payments through an IRS portal. Not having to wait an entire year to receive the benefit is a huge deal and makes it a genuinely far more accessible cash benefit — rather than something needy parents have to wait on at the end of the year.

There is in the 22-page legislation, per WaPo reporting, language that directs the Treasury Department to create an online portal for parents to sign up for the benefit. In this portal they can also report changes in income to become further eligible for the payment, or vice versa.

Which parents will receive the credit?

The plan would begin to diminish in cash benefits for single filers making $75,000 per year and dual filers making up to $150,000 a year, with no bottom limit to the benefit. Democrats want to make the credit fully refundable, which means that parents will have access to hundreds of more dollars a year than they would have under the previous iteration of the child tax credit.

Will this actually happen?

Without getting into the minutiae of the rules, the answer is maybe. It will take all 50 Senate Democrats to support both the proposal and using budget reconciliation, which requires a simple majority, and not the standard legislative process, which requires 60 votes for cloture to end a filibuster. The rules of budget reconciliation are somewhat unclear when it comes to adding to the deficit. The Democrats could also vote to end the filibuster, an idea that many still hesitate to support.

What would be the effect of this plan becoming law?

A Columbia University study found that, along with the other proposals in Biden’s plan, a fully refundable child tax credit could cut the child poverty rate in half, from 13.4 percent to 6.6 percent. Its implementation could also continue to build a consensus, after two popular economic aid payments in previous COVID-19 relief bills, that the government can and should simply send people money — especially to children, the poorest population group in the United States. Indeed, the White House has signaled that if the plan is successful, they would move to make the allowance permanent. And given the fact that Mitt Romney has released his own, budget-neutral version of the plan, there’s clearly a strong willingness to simply give people money to raise kids across the aisle.

It’s this kind of consensus that Democrats are relying on to make these changes permanent.