American families with children are one step closer to a cash injection that could lift millions of children out of poverty and be the seed money for a better life. Senate expands Child Tax Credit eligibility and makes credit payments more generous.
The IRS would send out recurring direct payments to parents from July through December and balance the rest into a balloon payment next tax season. Biden‘s total aid proposal could cut the child poverty rate in half by lifting 5 million children out of poverty, according to the Center on Poverty and Social Policy at Columbia University. There are no specific spending requirements for the Child Tax Credit money, but parents can surely find many ways to use the funds to defray the rising costs when it comes to raising children. “Altogether, the American Rescue Plan will be one of the largest anti-poverty bills in recent history,” Senate Majority Leader Chuck Schumer said in the Senate plenary on Saturday before the vote. 50-49 along party lines. It is not yet a closed deal. The House of Representatives has yet to vote on the Senate version of the bill and President Joe Biden has to sign it. Speaking to reporters after passage, Schumer anticipated that the bill would pass the House and have Biden’s signature before federal unemployment benefits end at the end of the month. “This plan is historic,” Biden said Saturday afternoon, emphasizing twice that the bill can cut child poverty rates in half. Read: Biden expects stimulus payments to start this month, says passage of the law speeds up vaccines Changes to the Child Tax Credit are for one year, but that’s only for now, advocates hope. “This is a really important and significant policy change,” said Michele Dallafior, senior vice president of budget and taxes for First Focus on Children, speaking before the vote. “And the next step will be to make it permanent.” Critics wish it never got that far. Sen. Chuck Grassley, an Iowa Republican who voted “no,” said the entire bill was stuck and focused on liberal priorities rather than targeted pandemic relief. “We could have delivered the same amount of COVID relief in half the time at one-third the cost to the taxpayer, and it would have been bipartisan,” he said in a statement after the vote. The Child Tax Credit in its current form pays up to $ 2,000 per child under 17 years of age. Up to $ 1,400 of the credit can be added to a tax refund, while the other $ 600 can only be used to subtract from a home tax bill. A taxpayer claiming the credit must have at least $ 2,500 in earned income to unlock the money that can be applied toward a refund. Credit begins to phase out for individuals earning $ 200,000 and couples earning $ 400,000. Under the recently passed bill, the Child Tax Credit now pays up to $ 3,600 for children under the age of 6. It also pays up to $ 3,000 for children over that age. Now it will also pay 17-year-olds. The $ 2,500 earned income threshold is cleared and the credit becomes fully refundable on the bill. Income eligibility rules for mirror credit stimulus check rules: Full payments apply to individuals earning less than $ 75,000, married couples earning less than $ 150,000, and single parents declaring heads of household and earn less than $ 112,500. Payments are phased out above those points. Undoing the earned income threshold is a particular benefit for Black and Latino children who disproportionately live in households that are below the earned income threshold, according to Katherine Michelmore, a professor at the Maxwell School of Citizenship and Public Affairs at the United States. Syracuse University. Some 6.7 million children are ineligible for the current credit because their household earns so little, according to Michelmore’s research. That’s 10% of all children in the country, their study said. Another 17 million children miss out on the credit due to rules surrounding partial repayment, their study revealed. That’s about another 25% of the kids in America. “What this reform is doing is completely removing revenue from the equation,” Michelmore said. That’s a serious flaw, some critics say. Biden’s proposal “would remove work obligations from one of the largest cash welfare programs and reestablish the principle of welfare as an unconditional right,” wrote right-leaning senior researcher Robert Rector for the Heritage Foundation. . “By increasing cash benefits while eliminating work requirements, the Biden plan would increase dependency and reduce work.” Michelmore, who is excited about the Senate bill’s passage, disagrees. “I don’t think the magnitude of the credit is big enough to create a job disincentive.” “As an investment in health alone, an allowance per child is a remarkably good investment.” Recurring payments are important for families with difficult finances, Dallafior said. That can be money for basic necessities, school expenses, and peace of mind for parents. “Research shows that stable and regular earnings reduce stress, and that also translates to better outcomes for a child.” These types of payments will cost the government a lot of money, the researchers acknowledge. The renewed credit will cost $ 100 billion a year, but could bring $ 800 billion in social benefits in the future, according to the Center for Poverty and Social Policy at Columbia University. For example, there are the improved earnings of children with better starts and the additional taxes on those earnings. “Considered only as an investment in health, an allowance per child is a remarkably good investment,” the researchers wrote. Of course, parents know a thing or two about children and expenses. A middle-income family would have to pay nearly a quarter of a million dollars to raise a child from birth to 17, according to a 2017 analysis by the US Department of Agriculture.After adjusting for inflation, that follows. being an increase of almost 16% in the cost compared to what a family had to spend in 1960 to raise a child. The pandemic has kept that costly trend alive. Weekly rates for babysitters, after-school programs and child care centers increased, according to an analysis by Care.com, a platform for parents and caregivers. For example, parents in 2020 paid an average of $ 209 per week for a young child to attend daycare, a 3.5% increase from the previous year. The bill also allocates $ 39 billion for both child care costs and distressed child care facilities. It may come soon enough, said Sarah Rittling, executive director of the First Five Years Fund, an organization that pushes for equitable access to high-quality early childhood care and education. “With today’s Senate vote,” he said, “American families and businesses, including child care providers, are one step closer to receiving the relief they desperately need.”