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.

White House Prepares Infrastructure Bill With Expanded Child Tax Credit, Free Community College & More

The Biden administration has already won some victories in the battle to provide aid to the American people. For example, the $1.9 trillion coronavirus relief package that was passed in March has extended unemployment insurance, expanded the child tax credit, provided a new round of stimulus checks, and more. Now the Biden administration is pushing a $2.3 trillion infrastructure bill that will further help struggling Americans, as well as improve the country’s infrastructure. 

Repair Americalarge road truck with a flat bottom doing roadwork.

Part of Biden’s plan is focused on infrastructure spending, with a proposed $115 billion going toward repairing roads, bridges, waterways and railways across America. The bill would also set aside $100 billion for our country’s education infrastructure, including upgrading older schools, as well as building new ones. This spending would also go towards universal pre-K, free community college, and reduced tuition at historically African American colleges and universities.

Lower the Price of Medications

One of the largest issues for millions of Americans is the cost of medications. In fact, prescription drugs can be so expensive that many Americans are seeking medications from other countries. President Biden wants to change all of that: the White House plans to force pharmaceutical companies to lower their prices or pay a penalty. 

Focus On Climate Changeelectric vehicle parking only sign with a car on it and an e-charging station.

Biden’s plan does not stop there. The president is also proposing spending billions on rebates and tax incentives to encourage Americans to purchase electric vehicles, and for transitioning school buses and transit vehicles from diesel to electric. The bill would also include $400 billion to combat climate change, including $60 billion related to green transit and $46 billion for climate-related research and development. Biden also hopes to install electric-vehicle charging stations across America. 

Expand the Child Tax Credit

As part of the recently signed Covid relief bill, an increased child tax credit is in effect for just one year, but Biden hopes to expand the child tax credit for several years with his new proposal.

Help Low-Income Americans

The proposed bill will include $200 billion for housing infrastructure, including $100 billion to expand housing for low-income Americans.

Increase Corporate Tax

illustration of a calculator on a piece of paper with money next to the paper.
President Biden is hoping to increase the corporate tax by 7% in the infrastructure bill.

President Biden is seeking to raise the corporate tax rate from 21% to 28%. He also plans on increasing taxes on wealthy investors. Republicans are opposed to the tax increase: “The GOP won’t vote for these tax hikes. Why should they be the tax collectors for Biden’s spending spree?” said Brian Riedl, a former aide to Sen. Rob Portman (R-Ohio). 

The infrastructure bill is still in the planning stages, and is not yet ready for debate in the House and Senate. President Biden met with bipartisan members of the House and Senate on Monday, April 12 to discuss the infrastructure plan. Republicans criticized the reliance of the bill on corporate tax increases, and Biden acknowledged it and said he would continue to work with Republicans to get their support. He even offered them the ability to offer their own proposals, stating, “I’m open to other ideas,” he said, “so long as they do not impose any tax increase on people making less than $400,000.” A senior Republican senator said he and his colleagues could support an infrastructure bill of around $800 billion that focuses on improvements to roads, bridges and broadband access that would be funded through user fees and tax incentives. Negotiations are set to continue in the meantime.