Senior Democrats on Monday will unveil legislation to provide $3,000 per child to tens of millions of American families, aiming to make a major dent in child poverty as part of President Joe Biden’s $1.9 trillion economic relief package.
The 22-page bill to dramatically expand direct cash benefits to American families was obtained by The Washington Post ahead of its release.
Under the proposal, the Internal Revenue Service would provide $3,600 over the course of the year per child under the age of 6, as well as $3,000 per child of ages 6 to 17. The size of the benefit would diminish for Americans earning more than $75,000 per year, as well as for couples jointly earning more than $150,000 per year. The payments would be sent monthly beginning in July, a delay intended to give the IRS time to prepare for the massive new initiative.
The bill, spearheaded by Rep. Richard Neal, D-Mass., chair of the House Ways and Means Committee, emerges as congressional Democrats accelerate their plans to enact Biden’s stimulus plan within weeks. It also comes days after Sen. Mitt Romney, R-Utah, surprised policymakers with a proposal to send even more in direct cash per child to American families, lending bipartisan support to the major push for child benefits.
Biden’s proposed child benefit has quickly emerged as a potentially defining feature of his administration’s economic agenda – one that could make a lasting imprint on American welfare policy. Its execution could also prove crucial to deciding Democrats’ ability to maintain control of Congress, given its likely direct impact on the lives of tens of millions of voters.
Despite Romney’s support, several Republican lawmakers and conservative scholars have started criticizing similar measures because they would give government aid both to working and nonworking Americans alike. That has set the stage for a major political clash over the new benefits.
Biden’s plan has been estimated to cost upward of $120 billion per year, which would add to the national deficit as part of the Democrats’ broader package.
“The pandemic is driving families deeper and deeper into poverty, and it’s devastating. … This money is going to be the difference in a roof over someone’s head or food on their table,” Neal said in a statement. “This is how the tax code is supposed to work for those who need it most.”
America has one of the highest rates of child poverty in the developed world, according to the Organization for Economic Co-operation and Development, in part because it spends less on child benefits than almost any other. Neal’s plan would only create the new benefit for one year, but congressional Democrats and White House officials have said they would push for the policy to be made permanent later in the year.
White House officials and Senate Democrats have reviewed Neal’s legislation and are supportive of the proposal. Aides cautioned some of its details may change between now and final passage of the legislation. It is also unclear whether Democrats can pass the new child benefit through the Senate under the rules of reconciliation, the parliamentary procedure they are using to pass Biden’s stimulus without Republican votes. House Speaker Nancy Pelosi, D-Calif., has said she is aiming to pass Biden’s relief package, which would include the child benefit, through the House within two weeks.
An analysis by Columbia University researchers of Biden’s proposal found it would cut the number of children in poverty by as much as 54 percent, the equivalent of 5 million children. More than 1 million Black children would be lifted out of poverty by the plan, the researchers found.
“Of all the policy issues being discussed this Congress, of all the things we are working on, the biggest impact we can make for economic justice in our country – and enact measurable transformational change – lies within this policy that would slash child poverty,” said Sen. Cory Booker, D-N.J., who has been involved in similar efforts in the Senate, in an interview.
The White House called generally for an expansion of the Child Tax Credit in its initial stimulus proposal, largely leaving how to do so to congressional Democrats.
Neal’s office has now filled in those details. Under his bill, the IRS would base eligibility for the payments on families’ prior year income, which is also similar to how it sent out stimulus payments last year. The legislation would create an online portal, managed by the Treasury Department, for families to update their incomes if their annual incomes decline and they became eligible for the payment as a result.
The IRS would begin sending out payments July 1 in a similar fashion to how it sent out the stimulus payments, directly depositing the payments in taxpayers’ bank accounts. Crucially, the benefits would not be deducted off taxpayers’ existing tax liability, meaning American parents would still receive $250 per month per child – or $300 per month per young children – even if they have an existing tax obligation with the IRS.
The benefits will also be delivered monthly in an attempt to help poorer parents facing fluctuations of income. That may be difficult for the IRS to achieve. Treasury officials have told Democratic lawmakers that they will do their best to implement the program. But concerns remain about the capacity of the tax agency to stand up the new benefit during a pandemic and filing season that has already stretched the IRS thin.
Congress has also substantially cut IRS funding over the past decade, largely due to Republican efforts to curb its influence. The Democratic plan calls for substantially increasing funding for the IRS to implement the plan, although the precise amount remains unclear. It also says Treasury Secretary Janet Yellen can adjust the monthly payment structure if she decides it is “not administratively feasible” and instead deliver the payments at the “shortest interval” that is.
Neal’s plan also creates a “safe harbor” provision for parents who are mistakenly sent the benefit. Many parents who are caring for a child one year may not the next, but since eligibility is based on prior year income the IRS may still send them a check anyway. The “safe harbor” provision aims to prevent parents of poorer and moderate incomes from being saddled with a surprise bill at tax time because the IRS incorrectly assumed they were owed the child benefit, excluding them from requirements to pay the bill back at the end of the year.
The Neal plan represents an expansion of an existing $2,000 Child Tax Credit under current law, both through extending it to low-income families and by making it more generous. Under Neal’s plan, the phaseout parameters for this existing $2,000 would not change. Lowering the income requirement for that $2,000 would reduce its value for more affluent families, and violate Biden’s pledge not to raise taxes on families with below $400,000 in annual income.
On the right, conservatives have begun increasingly arguing that the expansion of child benefits represents a dangerous expansion in America’s welfare programs. Scott Winship, director of poverty studies at the right-leaning American Enterprise Institute, wrote last week that Romney’s plan would discourage poor Americans from working by giving them government subsidies.