WASHINGTON — Bipartisan tax package passed by U.S. House of Representatives last month It’s not a done deal yet, but supporters of the proposal say it could restore some of the poverty-reduction benefits that benefited millions during the pandemic when the child tax credit was expanded.
Most low-income families who do not currently qualify for the full relief will see some escalate in the first year of the three-year agreement, according to analysis by the Center for Budget and Policy Priorities.
The Center estimates that if the law becomes law, 16 million of the 19 million children from low-income families who do not receive the full credit because of low earnings would benefit in its first year.
At the top of the list of states where these children live are (in this order) California, Texas, Florida, New York, Georgia, Illinois, Ohio, North Carolina, Pennsylvania, and Michigan.
“Expanded kid tax loan “The American Rescue Plan was a life-changing boost for families in Pennsylvania and across the country, and I have been fighting to restore it every day since it expired,” U.S. Sen. Bob Casey (D-Pa.) said in a statement. “This bipartisan agreement passed by the House is an important step toward ensuring families have the resources they need to thrive while supporting businesses across Pennsylvania.”
“This is Congress’s only chance this year to pass legislation that will significantly increase the incomes of millions of low-income families and significantly reduce child poverty,” said Stephanie Hingtgen, a research analyst at of liberal tendencies We focus on budget and political priorities.
A successful bipartisan, bicameral legislative package would be a occasional victory for both lawmakers and the administration, especially in an election year. Many of the parents who would benefit live in key swing states in 2024.
CBPP’s analysis calculates that about 400,000 children will be lifted above the poverty line in the first year. The overall benefits will reach families regardless of race and ethnicity, and will especially facilitate low-income rural families, according to the additional report.
Hingtgen found that families of 2.5 million children in rural areas would see an escalate in the first year. Georgia, Kentucky, Mississippi, North Carolina, Ohio and Texas would see benefits for more than 100,000 children in their rural communities, she said.
Both Democrats and Republicans are touting the deal, called the Tax Relief for American Families and Workers Act, as a compromise because it would expand the child tax credit while extending the Trump-era tax breaks for corporations through 2025.
Expanding the child tax credit has been a rallying cry for Democrats since a momentary pandemic-related expansion in 2021 lifted more than 2 million children out of poverty, according to census data.
The Latest History of Child Tax Credit
The amount of the child tax credit was doubled by the Tax Cuts and Jobs Act of 2017, from a maximum of $1,000 to a maximum of $2,000 per child under age 17. The actual refundable portion of the credit for 2023 — the amount a parent might see on their tax refund check after they settle their tax liability — is capped at $1,600.
However, low-income people rarely receive the full refund amount because it is gradually increased by 15% on the dollar for incomes above $2,500. Households that earn less don’t even qualify.
Under current law, a single parent with two children would have to earn about $29,000 a year to get the full credit, or about $34,000 for married couples, according to the Center on Budget and Policy Priorities. Families with more than two children would have to have even higher annual income levels to get the full credit.
As the United States recovered from the economic impact of COVID-19, Congress approved annual expansion tax credit of up to $3,000 per child under age 18 and $3,600 per child under age 6 — even for families with incomes from zero to $2,500. Lawmakers made the entire amount refundable, with some of it sent to families in monthly installments.
Defenders praised findings which proved that momentary relocation was a game changer in the fight against poverty in the US
Hope for low-income people?
The changes currently being negotiated in Congress include several benefits for low-earning parents. First, the refundable portion of the credit will gradually escalate for tax years 2023, 2024 and 2025 — from $1,800 to $1,900 to $2,000.
Second, parents could employ their current or previous income to calculate their tax credit — what tax experts call the “look-back” approach — and thus maximize their refunds. That way, if a parent or couple falls on challenging times because of a job loss or illness, they can decide to employ the higher income from the previous year on their tax return when claiming the credit.
Third, the credit will be phased in gradually, at a rate of 15 percent per child dollar for incomes above $2,500, allowing immense families to receive the full credit more quickly (as illustrated in a helpful example). table from the Tax Policy Center).
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“For example, a family consisting of a married couple with three children — one parent earns $32,000 as a farmworker, while the other parent stays home to care for the two younger children while the older child goes to school — I mean, under the expansion, the family would receive about $1,900 per child, for a total of $5,800. That’s almost a $1,000 increase over current law,” Hingtgen said.
“This is real money that a family can use to buy food, clothes and school supplies for their children.”
Republican Party Opposition in the Senate
Although the bill received overwhelming bipartisan support in the U.S. House of Representatives on January 31 when it passed by a majority vote, 357-70 votes, the deal is facing opposition from some Republican lawmakers in the U.S. Senate.
Several, including GOP Sen. Mike Crapo of Idaho, the ranking member on the Senate Finance Committee, hope to make “the changes necessary to build support,” Crapo said after the vote in the lower chamber.
Both Crapo and Republican Sen. John Thune of South Dakota told reporters that one of their main concerns is the “look-back” provision that would allow parents to employ earnings from the previous year, according to comments The senators gave hallway interviews prepared by Crapo’s office.
Scientists from the American Enterprise Institute published paper in January warned that allowing parents to calculate benefit eligibility based on current earnings or the previous year’s earnings “would have significant labor market impacts that require further study before Congress could consider adoption.”
According to the AEI analysis, the change every two years “would result in more than 700,000 parents not working.” At the same time, the change would double the incentive to work for the minority of caregivers who don’t work within two years and “would result in 395,000 parents entering the workforce,” write researchers Kevin Corinth, Angela Rachidi, Matt Weidinger, and Scott Winship.
Hingtgen rejects this argument.
“Generally speaking, the relief only applies to families who have income and the look-back provision only applies to people who have an earnings history, so it’s not really a cause for concern,” she said.
Combining expansion with business tax breaks
Other criticism part of the deal is aimed at “bargaining,” which lawmakers describe as a compromise, according to the group Patriotic Millionaires.
In addition to expanding the child tax credit, the bill restores corporate tax credits that expired or were phased out under the 2017 tax law.
One is a provision that allows businesses to count purchases, such as $30 million in equipment, as expenses in their first tax year, rather than deducting them over multiple years as was the case under the previous law.
Patriotic Millionaires, a group of wealthy individuals that lobbies Congress on tax policy, calls it an “unequal transaction.”
“These tax cuts go into the pockets of very, very wealthy Americans,” said Bob Lord, the group’s senior tax policy adviser. “… We shouldn’t have to pay a ransom to super-wealthy Americans every time we want to help poor kids.”
It is unclear when the tax deal could be voted on in the Senate.
If senators opposed to the bill allow time to expire this year for legislative debate in the upper chamber on the deal, lawmakers will not be able to escape the upcoming tax policy negotiations because the Trump-era tax law is set to expire in 2025.
Democratic Sen. Ron Wyden of Oregon, the chairman of the Senate Finance Committee, speaks regularly with colleagues and Majority Leader Chuck Schumer of New York, according to committee staff.
“No decisions have been made at this point regarding the markup or voting process, but Senator Wyden’s clear goal is to make the expanded CTC program available to children and families who qualify as soon as possible,” said Ryan Carey, a spokesman for the committee.
The Capital-Star team took part in the project.
