A big part of President Biden’s coronavirus relief package is focused on children. The president says he wants to expand the federal child tax credit, which gives families money for each child they have — or at least reduces their taxes.
This change could help lift nearly 10 million children above the poverty line or get them closer to it, according to the nonpartisan Center on Budget and Policy Priorities.
“You have 27 million children in our country who do not get the full maximum amount [of the tax credit] because their parents do not make enough money,” says Chuck Marr, the center’s director of federal tax policy, in an interview with NPR’s Morning Edition.
Currently, he says, “the child tax credit is a $2,000 credit, and it’s very simple for middle-class children and higher-income children. They just get $2,000 per year per child.”
Unlike a tax deduction, a tax credit reduces the tax bill “dollar for dollar. And that’s what makes it very powerful,” Marr adds.
Biden proposes expanding the credit for low-income households and raising it to $3,000 per child and $3,600 for children under 6 years old.
White House press secretary Jen Psaki says Biden’s $1.9 trillion COVID-19 economic rescue plan would “reduce the number of kids living in poverty by 5 million this year and cut child poverty in half.”
Below are highlights of the interview with Marr, edited for length and clarity.
You said the child tax credit was for middle-class and upper-income people. What do you mean by that?
Yeah, it’s simple for them. They just get the simple maximum $2,000 tax credit. For lower-income people it’s more complicated because there’s a formula that phases in with their income. So essentially once a low-income person passes a threshold of income of $2,500, the child tax credit phases in at 15 cents on the dollar.
And so the result of that is you have 27 million children in our country who do not get the full maximum amount because their parents do not make enough money. So roughly, for example, half of the Black children in the U.S. do not receive the maximum child tax credit because their parents don’t make enough money.
Oh, which you’re pointing out because African Americans have a higher rate of poverty. Is that why that is?
But every kind of person, every race of person who’s low income is affected by this. Now we’re getting to what the Biden administration wants to do different when they talk about making this tax credit refundable, what does that mean?
Right now, for low-income people who would not have a sizable income tax liability, their eligibility to the child tax credit is tied to their earnings. And what President Biden and Vice President Harris are proposing is to remove that earnings connection. So the result would be that all children essentially would receive the full child tax credit, which would now be increased.
When you have conversations with conservatives talking about tax policy a lot are in favor of cutting taxes, the government taking less of a person’s money. But when you start paying money back to people, particularly poor people, some people have a really strong, visceral reaction to that. What are the politics of this?
There is a mix and actually there’s quite a bit of momentum on the Republican side. Prominent Republicans in the Senate have actually identified the child tax credit as an area of possible cooperation with President Biden. Sen. [Mitt] Romney was the first Republican to advance a proposal to make a large share of the child tax credit fully refundable — exactly in line with the proposal that President Biden has advanced. [On Thursday, Romney proposed a measure to provide a cash benefit of $350 per month for children up to 5 years old ($4,200 per year) and $250 per month for 6- to 17-year-olds ($3,000 per year).]
And there is very much an entry point here for conservatives from a family perspective. They see this as strengthening families, helping children, investing in children as well.
What do you think about a provision of this tax proposal that would make it a monthly payment for people? Instead of getting one check sometime after April 15, they’d get 12 across the course of the year.
Yes, so let’s take an example. Picture a single mom with a young little toddler and then a daughter who’s a second grader. And the mom works around her children’s schedule as a home health aide — helping an elderly person get meals, shower and she makes about $10,000 a year. So right now, she receives $600 in child tax credit per child. But under this proposal, she would receive $3,600 for the toddler, $3,000 for her second grader. Each month that would be about $500. And that’s food, that’s rent, that’s clothes. It really could make a difference in those children’s lives.
I think what makes this proposal so exciting is that in one fell swoop, it’ll essentially lower the child poverty rate by more than 40%.