Children draw on a Treasury check prop during a rally outside the US Capitol on December 13, 2021.
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Millions of families have come to rely on monthly pandemic-era child tax credit checks of up to $300 per child, a program that expired last December.
Now, a new Republican Senate proposal aims to restart monthly payments to parents — with new requirements, though.
The proposal, called Family Safety Act 2.0was created by Republican Senators Mitt Romney of Utah, Richard Burr of North Carolina and Steve Daines of Montana, who describe it as a “pro-family, pro-life, pro-marriage plan”.
The proposal follows the expiration of an expanded child tax credit that gave families access to monthly child tax credit payments for the first time. This included $300 per month for each child under 6 and $250 per month for each child 6-17.
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Monthly payments began in July and ended in December, with families receiving cash up to half of the total credit value of $3,600 per child under age 6 and $3,000 per child age 6-6. 17 years. Families received the remaining credit when they filed their taxes this year.
Beginning in 2022, the Child Tax Credit is reverted to $2,000 per child under age 17 with no advance monthly checks.
The 2021 expanded child tax credit helped reduce child poverty by about 30% in December, measured by monthly income, according to the Center on Budget and Policy Priorities.
“The research is so strong that children’s lives would be so much better — school, health, future income,” said Chuck Marr, vice president of federal tax policy at the Center on Budget and Policy Priorities.
“There was so much promise, it was a big step forward,” he said. “So it’s terrible that it has lapsed.”
The new proposed Family Safety 2.0 Act is a “welcome development” showing that there is credit-building support available to low-income families, the Center on Budget and Policy Priorities said in a statement. new analysis.
Yet while it could “create an opening” for expansion this year, it has “significant weaknesses”, the group wrote of the proposal. Some children from low- or no-income families may receive a partial child tax credit or no credit at all. In addition, a significant reduction in the earned income tax credit and other offsets could make things worse for millions of children, the Center on Budget and Policy Priorities found.
The offices of the sponsoring Republican senators did not respond to requests for comment before press time.
Under the Republican senators’ plan, families would receive $350 per month per child until age 5, for a total of $4,200 per year. They would receive $250 per month for children ages 6 to 17, for a total of $3,000 per year.
Benefits would be limited to a maximum of six children per year.
In order to receive the full benefit, families would need to earn $10,000 in the previous year. Those earning less than $10,000 would have their credits reduced in proportion to their income.
The child tax credit would begin to disappear at $200,000 of income for single filers and $400,000 for joint filers. For every $1,000 earned above these thresholds, the credit would be reduced by $50.
Expectant parents would also be eligible to start receiving payments four months before their child’s due date. This would include monthly payments of $700, up to $2,800 per pregnancy.
The in-work income tax credit, which provides tax relief to low- and middle-income workers, would see reductions in both the phase-in rate and the maximum credit available to single parents and married couples with children.
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Earned income tax credit reductions would result in estimated annual savings of $46.5 billion.
The bill also calls for the elimination of the state and local tax deduction, which the proposal calls “inefficient tax relief for high-income taxpayers.” This change would result in savings estimated at $25.2 billion.
It also proposes removing head of household status, which would save about $16.5 billion.
In addition, eliminating the child portion of the child care and dependent care credit would reduce another $4.7 billion per year.
In total, these changes represent annual savings of $92.9 billion.
Under the current child tax credit, children from families with low or no income receive only part of the credit or no money at all. The Center on Budget and Policy Priorities calls this a “major flaw.”
That all changed last year when the American Rescue Plan Act temporarily made the credit fully refundable, meaning it was fully available to children from families with little or no income.
The estimated 30% drop in child poverty in December included about half of all black children, half of Latino children, one-fifth of Asian children, one-fifth of white children and about half of children who live in the rural areas, according to the Center on Budget and Policy Priorities.
Denying credit to children based on their parents’ income will not help increase their parents’ employment and will hurt children’s future, the group found.
Still, the Republican proposal has several strengths, according to the analysis. First, the credit applies more quickly as family income increases, on a per child basis.
Second, it also staggers the credit starting with the first dollar of income, rather than after the first $2,500 of income under current law.
Third, it also eliminates the current cap of $1,500 that families can receive in reimbursement.
New Hampshire parents and others gather outside the Manchester office of Senator Maggie Hassan on September 14, 2021.
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But the plan has other downsides, including cuts to the working income tax credit and the elimination of head of household tax filing status, according to the Center on Budget and Policy. Priorities.
For example, a mother earning $25,000 a year with a toddler and a daughter in grade two would qualify for a child tax credit of $3,640, but would lose $4,105 due to reductions in the child tax credit. tax on earned income, which would result in a loss of net income of $465, according to the Center on Budget and Policy Priorities. If both children were 6 or older, the net loss of income would be $1,665.
According to the Center on Budget and Policy Priorities, about 7 million families earning less than $50,000 would be worse off under the Republican plan compared to the current law. The median loss would be over $800 per family.