Child tax credit: Enhanced credit could be extended through 2025
WASHINGTON (NewsNation Now) — President Joe Biden announced the expansion of the child tax credit through 2025 as part of his American Families Plan. The president will introduce the plan during his address to a Joint Session of Congress on Wednesday.
The American Families Plan, the second half of the president’s Build Back Better agenda, will focus on paid family leave, free community college, universal pre-kindergarten, and other domestic policies. The plan is expected to cost more than $1 trillion.
An enhanced child tax credit was passed earlier this year to temporarily increase the existing child tax credit from a maximum of $2,000 a year per child to $3,000 for each child aged 6 to 17 and $3,600 for children under 6. It offers the option for families to receive advance monthly payments rather than waiting for a lump sum based on the parents’ tax liability.
White House spokesman Michael Gwin said Biden has “already put forward the first part of his historic plan to invest in the strength of America’s economy and families, and he’ll be outlining the second element of that proposal in the coming days.”
The head of the IRS said last week that he expects to meet the July 1 deadline in the new pandemic relief law for starting the tax program aimed at reducing child poverty. This means the new advance monthly payments of as much as $300 per child could begin distribution to lower-income families this summer.
IRS Commissioner Charles Rettig said it will cost nearly $400 million and require the hiring of 300 to 500 people to get the monthly payment system and electronic portal in place for the child tax credit.
In embedding the expanded child tax credit in the $1.9 trillion rescue legislation enacted last month, Democrats sought to provide support to families affected by the coronavirus pandemic and parents forced to cut down on work or give up jobs to take care of children after losing access to childcare.
Democrats view the tax change as an opportunity to address income inequality worsened by the pandemic. According to some academic estimates, it would reduce the number of children living in poverty in the U.S. by more than half.
But Democratic proposals to extend the relief have sparked criticism by Republicans, who have criticized the initiative as an expansion of the welfare state that removes the incentive for parents to seek work. They have expressed concern about fraud in the program and is asking what the IRS will do to crack down on improper payments.
The new child tax credit “is not targeted to pandemic relief, and risks the loss of billions of taxpayer dollars in fraudulent and improper payments,” Rep. Kevin Brady of Texas, the senior Republican on the House Ways and Means Committee, wrote in letters to Biden administration officials.
During last week’s hearing, Sen. Charles Grassley, R-Iowa, said he was concerned that the new tax benefit will remake the IRS’s role into a “social welfare-oriented” agency.
Rettig said the IRS will be fully able to detect and weed fraud in the new child tax credit program.
White House Press Secretary Jen Psaki said Thursday the president will outline the details of the American Families Plan on April 28 during a joint session of Congress.
Nexstar Media Wire and The Associated Press contributed to this report.