Is the Child Tax Credit Extension on the Chopping Block?

The ongoing pandemic has brought financial hardship to many people in this country; to help alleviate this, President Biden signed the American Rescue Plan Act into law in March, as part of the $1.9 trillion Covid relief bill. The ARP extended temporary child tax credits, giving the parents of 60 million children $250-$300 per child each month, which has had a measurable impact on child poverty. The Biden Administration had originally proposed extending these tax credits through 2025, while other Democrats are pushing for a permanent extension; however, as Democrats seek ways to cut costs for their spending plan, the child tax credit extension might now only remain in place for one more year.

The Impact Of The Child Tax Credit Extensionyound children smiling with a plate of food in their hands

The American Rescue Plan increased payments for parents of children aged 6-16 from the $2,000 offered in 2020 to $3000, with a $600 bonus for children under age 6 (or $250-$300 dollars per month). These payments have had a dramatic effect: according to a study from the Center on Poverty and Social Policy at Columbia University, the first two checks lifted almost 3.5 million children out of poverty. If this rate were to continue through 2025, the percentage of children living in poverty in this country would decrease from 14.2% to 8.4%. 

Is the Tax Credit Stopping People From Working?

Some politicians are criticizing the child tax credit extension, and are suggesting that it be subjected to further means testing based on household income. For example, Democratic Sen. Joe Manchin of West Virginia has proposed changes to the child tax credit, including limiting it only to families with an income of $60,000 or below, and adding a work requirement.

Currently, couples with household incomes of up to $150,000 in adjusted gross income and single parents households with incomes of up to $112,500 can receive the child tax credit extension. 

A study from University of Chicago economist Bruce Meyer found that 1.5 million workers, or around 2.6% of working parents, would leave the labor force over the next two years if the credit is extended. While this might concern some, the effect of adopting the $60,000 income threshold for eligibility would be that almost 37 million children would miss out on the tax credit.

2022 calendar with all the months
For now, the child tax credit will be extended until the end of 2022.

Where The Child Tax Credit Extension Stands

The 3-year extension to the credit proposed by the House is still on the table, and there might still be changes made to the program. Democrats have yet to vote on it, and then they will need to write the actual legislation. 

Representative Jared Huffman, who was in the meeting with progressives and moderate Democrats at the White House on October 19th, told reporters afterward that he did not “think any of that is written in stone, at this point.”

“[Biden’s] not jettisoning lots of elements of this thing. But he is working on the duration of some of them, and I don’t think any of it was fully resolved,” Huffman said.

For now, it looks like the child tax credit extension will continue through 2022.

About The Author:
Cassandra Love

With over a decade of helpful content experience Cassandra has dedicated her career to making sure people have access to relevant, easy to understand, and valuable information. After realizing a huge knowledge gap Cassandra spent years researching and working with health insurance companies to create accessible guides and articles to walk anyone through every aspect of the insurance process.

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