An expanded child allowance, paid family leave, subsidized childcare – none of these family policies the Biden administration has wanted have come to pass.
With less than a month before the new Congress gets to work, Democrats are bringing the conversation back to the table, but they are focusing on a specific policy – the expanded child allowance. In 2021, a test run of this idea was initiated that sent monthly checks to families as part of the pandemic relief package. Reports indicate that the initiative, while near doubling the government investment in children, did also achieve a substantial reduction in child poverty. However, since the effort concluded, statistics indicate about four in 10 Black and Latino children receive less than the full amount and roughly three percent of children of the lowest-earning parents have received nothing.
What’s the fight?
A focus area in the current debate seems to be on determining who will receive financial aid. Some Democrats are fighting to expand it to the lowest earners while some Republicans want to only give it to families who earn a certain amount to try and encourage those parents to work. A compromise is needed from both sides of the aisle in order for a new measure to pass.
Is there a current credit now?
There is a child tax credit still in place currently for this year with a maximum of $2,000 per child per year. However, when the Trump administration tax cuts expire in 2025, the credit is expected to return to what it was previously – $1,000 per child per year. Additionally, as it is now, parents are required to earn more than $2,500 a year in order to receive any financial support. Additionally, they do not start to receive the full amount until they are earning between $23,000 and nearly $30,000. The current credit also decreases when married parents earn more than $400,000 combined or $200,000 for single parents.
So, will it happen?
The biggest area of discussion continues to be regarding who should receive it. Most tax credits are known as ‘nonrefundable,’ meaning people cannot claim credit for more than the amount of taxes they owe. If a person pays no income tax, then they receive no credit. A ‘refundable’ tax credit, however, means that any amount larger than the taxes owed is paid directly to the person. The current child tax credit does include a portion that is refundable, but typically for very low earners. And the max that those individuals could receive is $1,500. People with no income still receive no credit.
Is it realistic this year?
Congress is pushing the deadline and running out of time to pass the proposal in this year-end spending bill. However, there is still time, although very little. Some Democrats are trying to negotiate by offering something Republicans want, an extension of corporate tax cuts. In the end, we won’t know until we know.