The 628 pages of the American Rescue Plan include a change that experts say will prove to be a “historic” step in reducing child poverty.
The proposal calls for a one-year expansion of both the value and scope of the child discount for American families, something that some studies have suggested could lift millions of children out of poverty.
The measure would increase the amount of the child discount to $ 3,600 per child under the age of 6 and $ 3,000 per child between the ages of 6 and 18. That’s higher than a maximum benefit of $ 2,000 under current policy. It also increases the ages of eligible children, previously capped at age 17.
The benefits are gradually beginning to disappear for heads of household who earn more than $ 112,500 per year or couples who earn more than $ 150,000 per year.
A notable change from the existing tax credit is that low-income families would benefit from the tax being refundable, meaning that even families with no income will receive it. Some experts have called current policy a “reverse benefit” because the greatest benefit does not go to those in greatest need.
“Lowest-income kids get nothing, moderate-income kids get limited benefits, and then middle-income kids get $ 2,000 per child,” said Elaine Maag, lead researcher at the Urban Institute, a Washington, DC-based think tank. about social and economic policy, of the current tax reduction.
Provided the COVID emergency bill is passed by the House and signed by the president, the new program will be administered by the Internal Revenue Service (IRS), which will dispense the credit year-round, making a payment to eligible families getting as much as $ 300 a month. Payments are expected to start in July.
The fact that low- and no-income people will be able to receive the credit is expected to be a major boost to families who lost income during the COVID-19 pandemic. Lawmakers who pitched the addition to the COVID-19 bill had hoped it could help ease economic stress.
“The pandemic is driving families deeper into poverty, and it’s devastating,” said House Ways and Means Committee Chairman Richard Neal, D-Mass., In a statement when the proposal was announced. “We’re making the tax credit for kids more generous, more accessible, and by paying it out monthly, this money becomes the difference between a roof over someone’s head or food on the table.”
Some experts say the legislation is “a long time coming,” as democratic proposals have been made to provide more help to families for years to come. But even for Republicans, the measure didn’t prove to be a sticking point in partisan negotiations over the bill – which still didn’t get a single Republican vote in the House or Senate.
The credit is only temporary and is expected to last for a year based on the approval of the US bailout plan, and at an annual cost of $ 100 billion. But the Democrats have made it clear their intention to make it permanent.
“This bill takes the first step, with an annual extension, and even that is extremely historic. It would lift more than 4 million children above the poverty line, reducing the number of children in poverty by more than 40%. If you look back historically, the tax credit for children and the tax credit for earned income in one fell swoop lifted approximately 5.5 million children out of poverty, ”said Kris Cox, deputy director of federal tax policy at the Center on Budget and Policy priorities, an independent research and policy institute.
The fact that this expansion is not linked to income also represents a philosophical change in social policy and puts America on track with other wealthy countries, many of which have child support or similar programs.
Zach Tilly, a policy officer at the Children’s Defense Fund, said the “milestone” expansion will “triple the poverty-fighting power” of the already useful tax credit for children.
“In the United States, we’ve had a kind of stubbornly high, persistently high child poverty for a long time, especially compared to the rest of the world,” Tilly said. “And I think a lot of that persistently high child poverty has to do with a long-term lack of federal investment in children, especially poor children, and especially children of color, especially black children.”
While the extension of child tax credit is universal, it will have great benefits for Black and Latino Americans who face disproportionate levels of poverty.
“Because of historical barriers to opportunity, families with children of color are disproportionately excluded from the full benefit and tackling racial equality is certainly a result of this legislation,” Cox said.
Some Republican lawmakers are concerned that removing the income requirement will discourage families from working. Sens. Marco Rubio, R-Fla. and Mike Lee, R-Utah released a statement saying they agreed to “recent proposals to increase tax credits for working families,” but wanted them tied to work.
“… We support converting the child tax credit into what has been called a ‘child benefit,’ which is paid out to all parents as a universal basic income. That is not a tax reduction for working parents; it is social welfare assistance.” An essential part of being pro-family is being pro-work. Congress should expand child tax credit without undermining parents’ responsibility to work to provide for their families. ”
Robert Rector, a senior research fellow at the Heritage Foundation, a conservative public policy think tank, argues that the expansion of children’s tax credits is a partisan attempt to reverse Social Security reform.
“At the very least, it sends a message that you can trust other people to support you. We have no expectations, you have to do anything to support yourself, and even poor people don’t really agree,” said Rector.
Others worry that the IRS may not be equipped for a project of this size. While the bill allocates funding to the IRS to provide more work in connection with the change, there are concerns about hiccups in implementation, especially in the middle of tax season, a historically busy time for the agency.
“I’m concerned that the IRS is getting overwhelmed,” said Maag of the Municipal Institute. “There was money in the legislation to try to fix this. They also have strong leadership that seems to want this program to work and leadership matters, especially when you’re trying to do new things. “
The IRS has deployed two rounds of direct payments in 2020, and Maag said those rounds of benefits, along with the information it gathers as Americans file taxes, have improved the data the agency has for deploying the expanded credit despite decades of austerity. which makes programs like this more challenging.
Once families receive the payments, experts speculate that the program – which puts money in people’s pockets – will be popular and therefore likely to continue.
“I think it is difficult to take away something that is popular. In this case, they try to provide this benefit all year in advance, which means they potentially send a monthly check to every eligible parent … and I would think that would make it difficult to take it away, Stomach said.
Benjamin Siegel of ABC News contributed to this report.