With Democrats and Republicans in Congress unlikely to be able to agree on almost anything, they may soon enact an expansion of the child tax credit that gives money to parents.
The loans are part of a $78 billion tax package that passed the House on a bipartisan vote of 357-70 on Wednesday night, a rare pro-family policy that has support from both parties. Although there is no guarantee of Senate approval, the deal has broad appeal across ideological lines.
Analysts say the child tax credit’s biggest benefits will go to the poorest families, and the payments could lift nearly half a million children out of poverty and reduce poverty by an additional 5 million people. Stated. According to some estimates.the study showed Families spend that extra money on food, child care, and other basic needs.
Still, according to Columbia University’s Center on Poverty and Social Policy, child poverty will be reduced by about 5% by 2025, compared to a temporary 35% reduction achieved by the child tax credit expansion passed during the pandemic. It will only be reduced.
“This is a pretty modest adjustment in the way things work,” said Patrick T. Brown, a research fellow at the Ethics and Public Policy Center, a conservative think tank. “But it also could pave the way for a broader conversation about the purpose of the child tax credit and how we can make parenting more affordable for parents of all stripes.”
Here’s how this proposal would work and why politicians like it.
How does the Child Tax Credit currently work?
Under current law, families are entitled to: Up to $2,000 tax credit To each child. But not all families receive the full amount. People who don’t work for a paycheck (or those with very high incomes) aren’t eligible, while others receive partial credit.
To qualify for the credit, a family must earn at least $2,500 a year, and payments increase with household income. A single parent with one child must earn approximately $24,800 before being eligible to receive the full credit. A married couple with two children would need an income of approximately $35,700. The structure is intended to encourage poor parents to work, a key requirement for many Republicans.
What does the new child tax credit do?
The new proposal retains that idea, but increases payments to poorer households that meet the minimum income threshold. It also increases her maximum credit amount per child to $2,000. to keep up with inflation. Families will then be able to choose between this year’s income or last year’s income when calculating the size of their credit.
Although the authors hope the new credit will be approved in time for this year’s tax filing season, it is only temporary, expiring at the end of 2025.
How will it help poor families?
In the first year, the new loans will reach an estimated 80% of households with incomes too low to currently receive the full amount, including around 16 million children, according to the left-leaning research group Center on Budget and Policy Priorities. It is said that it will become. .
This law does that by increasing the amount of money that poor families, especially families with multiple children, can receive. For example, a single parent with three children who earns $15,000 will receive triple the payment under current law in 2025, or $5,625 per year instead of $1,875.
During the pandemic, the child tax credit was expanded more generously for one year. The annual payments increased to up to $3,600 per child, which the government sent in the form of monthly checks. For the first time, it was given to households with no income. This expansion reduced child poverty by lifting 2.9 million children out of poverty in 2021. lowest interest rate ever. However, when it expired at the end of the year, many families fell below the poverty line.
How did this idea gain bipartisan support?
Spending on policies that help families has traditionally been a Democratic priority. But the bill was introduced by Rep. Jason Smith of Missouri, the Republican chairman of the House Ways and Means Committee. The opinion of Sen. Ron Wyden of Oregon, the Democratic chairman of the Senate Finance Committee, is written in a way that many Republicans agree with.
This is part of a broader tax package; reduce some taxes on businessesthe deficit likely won’t widen as much because the pandemic-era business tax credit that has fueled fraud will be eliminated.
In recent years, some in the Republican Party have begun to embrace government spending on specific family policies in response to the influx of working-class voters into the party and concerns from lawmakers about declining birth rates. This appeals to the values held by both parties, “both anti-poverty leftists and pro-family leftists,” Brown said.
Kristen Soltis Anderson, a founding partner at Republican polling firm Echelon Insights, said she’s seen a growing consensus among voters of both parties about the need for family policy. “There are a lot of Republicans who are very worried that they’re going to say ‘I do.’ “I don’t think she wants children,” she said. “There’s some culturally conservative anxiety around that.”
A sticking point for most Republicans was the income requirement to ensure that benefits would not be paid to parents who were not working. The new bill removes that obstacle.
Perhaps surprisingly, the bill has drawn opposition from some Democrats. The main complaint is that the bill is not generous enough. On Wednesday night, 23 House Democrats voted against the bill.
What do voters think about expanding the child tax credit?
While the idea is popular with voters across the ideological spectrum, it does not have majority support. His review of 31 studies on pandemic-era outbreaks found that on average: 6 out of 10 likely voters supported it.
What happens next?
The bill goes to the Senate. The majority leader, Sen. Chuck Schumer of New York, wants to bring the bill to the floor, but some Republicans have expressed concerns.
Even if the bill were passed, the additional benefits would end after 2025. And at that point, the child tax credit would be even smaller than what parents currently receive, with benefits of up to $1,000 per child. Another tax credit law is also set to expire in 2025.
Without future legislation, the child tax credit risks being significantly reduced.