On Monday, February 8th, House Democrats are set to reveal a huge budget priority for the group that has been set by President Joe Biden. That policy priority? To give American families and families with kids under 17 a monthly cash benefit.
The benefit, which could be up to $3,000 a year for families with kids over six and $3,600 a year for families under it per kid, would be created by utilizing the existing structure of the Child Tax Credit. The plan would dramatically alter and transform that tax code in order to make it happen.
The plan has been rumored about for weeks since President Joe Biden announced it as part of his $1.9 trillion stimulus package, and last week, Senator Mitt Romney even introduced his own version of the plan, which is more generous in terms of cash benefits but doesn’t cut into poverty as much because it cuts other social welfare programs that help American families survive. (President Joe Biden’s plan would cut child poverty by 54 percent.)
They are similar in some ways. Neither plan excluds the lowest of earners or non-earners who have historically been left ot of the child tax credit, and the plans are both fully refundable. But their differences are still massive.
No matter whose plan ends up getting passed — Romney’s, or what is functionally President Joe Biden’s, the political willpower behind giving parents monthly cash benefits to raise their kids has never been more intense.
Here’s what parents need to know about the child tax credit — that’s really just a basic income — for American families, and when they could expect to see it affect their wallets.
What Is the Benefit?
The benefit would give $250 per child or $300 per young child to American parents. That could amount to $3,000 a year if you’re a parent of just one child or $3,600 a year if you’re a parent of an older kid. The benefit would increase if you have more than one child, but it’s not clear if the benefit maxes out at some point, like how Romney’s does for very big families.
Unlike Romney’s benefit, which is universal, President Joe Biden’s plan would begin to diminish for couples that earn $150,000 a year and single parents who earn $75,000 a year. Romney’s benefit would give even the wealthiest earners access to the same benefit, although they would have to pay it back at the time of tax filing, whereas in Biden’s plan, the wealthier families would not receive the full benefit.
How Would It Work?
The 22-page legislation, which has been reviewed both by The Washington Post and CNN, reveals that the monthly payments would be administered through an online IRS portal. Parents attempting to access the benefit could sign up at the portal and enter their income and other identifying factors (like how many children they have) and then receive the monthly payment.
The payment they receive would be based on their previous year of tax filing — which is a problem during the pandemic, considering most people lost their jobs after the 2019 tax year, when much of the direct cash benefits are based on. But the idea of the monthly portal also appears to be due to the fact that if a family’s income status changes, they can change that information within the portal, as well.
When Would It Start Coming Out?
The bill, which is set to be introduced on February 8th, stipulates that direct cash payments to American families with kids would begin to go out on July 1st. That run-time is needed, as the plan makes ambitious use of the IRS and may require more funding of the government department and time to get the portal up and running.
Are There Problems With the Bill?
Yes. No bill is perfect. The first issue is the successful GOP efforts to underfund the IRS, a project of over a decade that makes the work of creating a massive tax payment project more difficult.
One problem, as noted by Washington Post, is if a family’s income isn’t set — like for workers who are contractors, restaurant servers, or do any job in the freelance world that would make their income change significantly from year to year, there are concerns that they could be punished at tax time if they utilized more benefits than they meant to. (There is a “safe harbor” provision in the bill to limit punishments on overpayment for parents.)
There are concerns that the bill might not be able to be passed under the razor-thin margin that the Senate Democrats have. Because of the margin, and the Democrats unwillingness to abolish the filibuster and operate on simple-majority rules, the Democrats have been operating under budget reconciliation. Because the bill will add to the deficit, rather than be budget-neutral as Romney’s is because it slashes essential programs, it’s hard to say if it could even pass.
Is It Going To Pass?
Maybe! It will be lumped in with the $1.9 trillion stimulus package, which will pass under the budget reconciliation process, but families can only wait and see as to what will happen next.