Though the Biden administration has come under fire for publicly stating that it’s open to more targeted $1,400 stimulus checks as part of its $1.9 trillion COVID-19 relief package, one proposal that’s perking ears is an expansion to the child tax credit. If you have children, then you likely receive a tax credit of up to $2,000 per child when you file your year-end taxes. And according to a new proposal from Democrats that was unveiled this week, there’s a deal on the table for enhancing it this year.
Per the plan, the expanded child tax credit would provide a $3,600 credit per child under 6 years of age and $3,000 per child under 17. Do the simple math and that would represent anywhere from a $1,000 to $1,600 increase for qualifying dependents, a move that could be even more important to families than the $1,400 stimulus check. Like the general stimulus checks, there would be some limitations on who would qualify for the funding. Terms of the proposal state that individuals making up to $75,000 or couples earning up to $150,000 per year would be eligible for the full credit and funds would gradually phase out the higher the earnings — similar to how the first two rounds of stimulus checks were pushed out.
Another interesting thing about this proposal is that it would allow families to receive the child tax credit on a per-month basis, rather than claim it when filing their taxes at year’s end. The thinking behind this change is that it would better allow families to provide for their children year-round and not have to manage a lump sum at year’s end. It could be a useful tool in combating child poverty for struggling families, with the expectation that it could halve it altogether.
It’s estimated that nearly 30 million American children would qualify their families for this enhanced credit. That would translate to roughly 10 million kids coming above the poverty line because of it.
Like any proposal or policy, there are pros and cons to this one as well. For instance, the IRS can’t just push a button and have this type of system in place. It would likely take months to implement, meaning that — if passed — families who opt to receive monthly checks likely wouldn’t start receiving them until sometime in the summer. In other words, it’s not exactly the instant relief that is often the goal of stimulus funding. What’s more is that it will be very costly for the IRS to get the program up and running, even if it’s to take effect by mid-summer — something to the tune of a projected $400 million.
Another concern with the proposal is that it’s only a temporary increase, so there’s the chance that those who it’s designed to help would fall back to square one after the program ends.
While some sort of stimulus package appears imminent, it’s clear that it still has a ways to go before a vote is taken. This proposal is an interesting new wrinkle.