Child Tax Credit: Proposal calls for new monthly payments but report cites ‘weaknesses’ in plan
(NEXSTAR) – Millions of families with children were able to qualify for the expanded child tax credit under last year’s pandemic relief bill, meaning they received a monthly payment of as much as $300 per child. Some lawmakers are now hoping to bring those monthly child tax credit payments back, despite concerns from one nonpartisan agency.
The child tax credit was expanded as part of President Joe Biden’s $1.9 trillion coronavirus relief package. Since the payments were first disbursed in July 2021, roughly $93 billion in payments have been made to tens of millions of families, according to Treasury.
A trio of senators – Mitt Romney (R-UT), Richard Burr (R-NC), and Steve Daines (R-MT) – recently proposed the Family Security Act 2.0 intended to provide some families with monthly checks, calling it “pro-family, pro-life, and pro-marriage.”
Under the proposed plan, families would receive $350 a month for each child 5 years old and younger, amounting to $4,200 a year, and $250 a month for children between the ages of 6 and 17, totaling $3,000 a year. Benefits would be limited to up to six children each year, and families would need to earn $10,000 in the previous year to qualify for full benefits.
Those who earn less than $10,000 each year would receive a benefit that’s proportional to their earnings. For example, a family earning $5,000 would get 50% of the maximum child tax credit, CBPP explained.
The Center on Budget and Policy Priorities, a nonpartisan research and policy institute, called the Republican proposal “a welcome development,” but noted it “has significant weaknesses.”
“Most notably, while it would increase the credit for most children in the lowest-income families, children in families without earnings in a year would get no credit at all, while millions of other children in families with very low earnings would get only a partial credit,” a report from the institute said. “And, low- and moderate-income families would have to pay for much of its cost through a large cut in the Earned Income Tax Credit (EITC) and other offsets, leaving millions of children worse off than they would be without the Romney plan.”
The report adds the Family Security Act 2.0 “falls short of the Rescue Plan expansion” of 2021 because it fails to make “the full credit available to families with little to no income.” The cut to the EITC and the “head of household” tax filing status are also major drawbacks to the plan, according to CBPP.
CBPP estimated about 7 million families earning less than $50,000 would be worse off under the proposed plan than under the current law. That would impact about 10 million children. Overall, because of the cuts to EITC and the head of household tax filing status, if the proposed plan were to be approved, the average family could lose more than $800, CBPP reported.
Still, the institute commends the plan for phasing in the credit after the family earns its first dollar – not the $2,500 required by current law – and eliminating the maximum on how much a family can receive as a refund.
As it stands now, there are no advanced monthly payments and families can receive $2,000 per child under the age of 17, CNBC explains.
The Associated Press contributed to this report.