February 6, 2023

Biden unveils proposal to allow parents with under-17 kids to receive monthly payments

  • Joe Biden rolled out a tax proposal to temporarily expand the child tax credit so it can better benefit families during the pandemic — and allow people to opt for monthly federal payments.
  • It would bump the annual tax credit to $3,000 for children under 17, plus an additional $600 for children under age 6.
  • Ernie Tedeschi, a policy economist at Evercore ISI, said the monthly payment element could strengthen families’ budgets, comparing it to a stimulus check ranging from $250 to $300 a month.
  • Visit Business Insider’s homepage for more stories.

Democratic presidential candidate Joe Biden rolled out a proposal on Thursday to allow families with children to receive a monthly federal payment of $250 to $300 during the pandemic.

The plan is a temporary expansion of the existing child tax credit, which shrinks the cost of raising kids in families’ tax bills. House Democrats approved the measure in May through the Heroes Act, and Biden incorporated it into his economic platform. 

People can currently claim a credit of up to $2,000 based on their annual income — an amount that was doubled under the 2017 Republican tax law. Biden’s plan increases that amount further to $3,000 for kids under 17 in 2021 — and adds $600 for young children age 6 and below.

It allows people to opt for monthly federal payments, a contrast to the annual relief that comes only after taxes are filed.

“Biden’s CTC expansion will provide thousands of dollars of tax relief for middle-class households,” the plan says. “It will also help the most-hard pressed working families avoid poverty and attain greater economic security.”

It would take effect in 2021 and “then as long as economic conditions require,” it reads.

The Tax Policy Center estimates 90% of families with children will receive an average of $2,380 from the credit this year. Around 40 million families claim it every year.

Ernie Tedeschi, a policy economist at Evercore ISI, said the Biden proposal would turn the tax credit fully refundable, comparing it to “the equivalent of sending people checks.”

“Once you make it refundable, its no longer dependent on what your tax bill is to the federal government,” Tedeschi told Business Insider. “You get it regardless of the tax you owe.”

He added the monthly payment element could strengthen families’ budgets, comparing it to a stimulus check ranging from $250 to $300 a month.

“That’s important because when you are talking about lower-income families, you have these expenses every month,” Tedeschi said. “The need for diapers doesn’t wait until April.”

Seth Hanlon, a tax expert and senior fellow at the left-leaning Center for American Progress, said the proposal would benefit low-income people who don’t reap as much of the benefits compared to middle-class families.

Read more: Morgan Stanley says the stock market’s future is ‘unusually dependent’ on another stimulus package — and recommends 5 portfolio moves to make if Congress passes another round

“The more dramatic impact is it reaches families that get much less than the full amount, those getting little or nothing from the tax credit now,” Hanlon told Business Insider.

The Biden plan carries some drawbacks, though. Tedeschi said that working through the tax code requires preparing the IRS to distribute payments to people who don’t file every year since their income is too low, and some could be left out as a result.

The Biden campaign is seeking to contrast their tax plan from President Donald Trump, which has been sparse in details. Trump has said he wants to provide additional tax cuts in a second term without elaborating further.

If Democrats recapture the Senate from the GOP, the proposal could become a reality. A majority of Democrats already back dramatically expanding the child tax credit, and its advocates say it would cut the child poverty rate in half.

The child tax credit expansion that the House approved strongly resembles the American Family Act introduced by Sens. Michael Bennet and Sherrod Brown last year. The Center on Poverty and Social Policy at Columbia University conducted an analysis indicating the legislation would lift over 4 million children out of poverty.

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