At a time when Democrats and Republicans in Congress seem unable to agree on much of anything, they may soon pass an expanded child tax credit, which gives money to parents.
The credit, part of a $78 billion fiscal package that the House could vote on this week, is a rare familiar policy that has bipartisan support. It is not guaranteed to become law, but the new agreement between Democrats and Republicans is part of a fiscal package with broad appeal across the ideological spectrum.
The biggest benefits of the child tax credit would be for the poorest families, analysts said: The payments could lift nearly half a million children out of poverty and reduce poverty for five million more, according to some estimates. Research has shown that families spend those extra dollars on food, child care and other basic needs.
Still, it would reduce child poverty by only about 5 percent by 2025, compared with a temporary 35 percent reduction achieved by a further expansion of the child tax credit passed during the pandemic, according to the Center on Poverty and Social Policy. from Columbia University.
“It's a pretty modest change in the scheme of things,” said Patrick T. Brown, a fellow at the Ethics and Public Policy Center, a conservative think tank. “But at the same time, it could pave the way for a broader conversation about what the purpose of the child tax credit is and how we can make it more possible for parents across the spectrum to raise a child.”
Here's how the proposal would work and why politicians like it.
How does the child tax credit work now?
Under current law, families are eligible for a tax credit of up to $2,000 for each of their children. But not all families receive the full amount: Those who don't work for pay (or have very high incomes) don't qualify, and others get a partial credit.
To qualify for any credit, families must earn at least $2,500 a year, and the payment amount increases with household income. A single parent of one child must earn about $24,800 before being eligible for the full credit; A married couple with two children should earn about $35,700. That structure is intended to encourage poor parents to work and has been a key requirement for many Republican lawmakers.
What would the new child tax credit do?
The new proposal would keep that idea intact, but would increase payments to poor families who meet that minimum income threshold. It would also increase the maximum credit of $2,000 per child to keep up with inflation. And it would allow families to choose between current year or previous year income when calculating the size of the credit.
The new credit, which its authors hope to approve in time for this year's tax filing season, would be temporary and would expire at the end of 2025.
How would it help poor families?
In the first year, the new credit would reach about 80 percent of families whose incomes are too low to receive the full amount now, including about 16 million children, according to the Center on Budget and Policy Priorities, a research group left-leaning. .
The legislation does this by increasing the amount that poor families, particularly those with multiple children, can receive. For example, single parents with three children earning $15,000 would receive triple the payment in 2025 that they would receive under current law: $5,625 a year instead of $1,875.
During the pandemic, there was a much more generous one-year expansion of the child tax credit. The annual payment increased to $3,600 per child and was sent by the government in the form of monthly checks. For the first time, it also reached families without income. That expansion lifted 2.9 million children out of poverty in 2021, reducing child poverty to the lowest rate ever recorded. But it expired at the end of that year, contributing to many families falling back below the poverty line.
How did the idea gain bipartisan support?
Spending on policies that help families has traditionally been a Democratic priority. But this bill, introduced by Rep. Jason Smith of Missouri, Republican chairman of the House Ways and Means Committee; and Sen. Ron Wyden of Oregon, Democratic chairman of the Senate Finance Committee, was worded in a way that has led many Republicans to embrace it.
It is part of a broader fiscal package that also cuts several business taxes and will not increase the deficit much because it eliminates a pandemic-era business tax credit that has become a magnet for fraud.
In recent years, a contingent of the Republican Party has begun to embrace government spending on certain family policies, driven by the movement of working-class voters toward the GOP and a concern among lawmakers about declining fertility rates. . It appeals to values held by both parties, “both the anti-poverty left and the pro-family right,” Brown said.
Kristen Soltis Anderson, founding partner of Echelon Insights, a Republican polling firm, said she had seen a growing consensus among voters in both parties about the need for family policies: “There are a lot of Republicans who are very concerned about young people saying, ' I don't think I want to have kids,'” she said. “There's a culturally conservative anxiety around that.”
The sticking point for most Republicans had been the income requirement, so that the payments would not go to parents who did not work. The new bill has removed that obstacle.
Perhaps surprisingly, the bill has generated some Democratic opposition; the main complaint is that it is not generous enough. Last week, the bill passed the Ways and Means Committee by a 40-3 vote: the three who opposed it were all Democrats.
What do voters think about an expanded child tax credit?
The idea is popular among voters across the ideological spectrum, although it does not have the support of a large majority. A review of 31 polls on the pandemic-era expansion found that, on average, six in 10 likely voters supported it.
What happens next?
The House could vote on the measure as early as this week. Speaker Mike Johnson said Monday that the bill would be voted on and he expects it to pass with large bipartisan numbers. If it passes there, it will move to the Senate, where prospects for passage also appear strong. Sen. Chuck Schumer of New York, the majority leader, hopes to bring it to the floor, and several moderate Republicans have indicated they will support it.
Even if the bill were to become law, the additional benefits would end after 2025, and at that point, the child tax credit would be even less than the amount parents receive today, up to a maximum benefit of $1,000 per child. This is because another tax credit law is also set to expire in 2025.
Without a future law, the child tax credit risks being significantly reduced.
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