It would allow people to choose monthly federal payments instead of an annual tax refund.
[Editor's note: Motherly is committed to covering all relevant presidential candidate plans as we approach the 2020 election. We are making efforts to get information from all candidates. Motherly does not endorse any political party or candidate. We stand with and for mothers and advocate for solutions that will reduce maternal stress and benefit women, families and the country.]
The pandemic has stressed parents in every way imaginable: Emotionally, physically and certainly financially.
With many in-person classrooms closed, the burden of daytime childcare and homeschooling is falling to mothers, who are being disproportionately impacted by layoffs. Moms are losing their jobs, and in some cases, even their homes.
So this week when Democratic presidential nominee Joe Biden proposed monthly federal payments of $250 to $300 for families, many were intrigued.
"As President, [Biden] will support a significant expansion of the Child Tax Credit (CTC) for the duration of the crisis, as proposed in the House-passed HEROES Act," the Biden campaign website now notes, adding that the credit would last "for 2021 and then as long as economic conditions require."
Here's what Biden's putting on the table: An expansion of the existing child tax credit, increasing it from $2,000 to $3,000 for families with kids over 6 and $3,600 for families with kids under 6.
Here's why that matters:
Biden's plan would allow people to choose monthly federal payments instead of an annual tax refund. The plan would also make the tax credits fully refundable.
Steve Wamhoff is the director of Federal Tax Policy at the Institute on Taxation and Economic Policy (ITEP). As Warnhoff explains, "current law limits the refundable portion of the credit to a percentage of earnings, not counting the first $2,500. This means that families with very low earnings will not receive the credit or will receive only a partial credit."
So although tax changes made by the Trump administration in 2017 increased the Child Tax Credit from $1,000 to $2,000 per child, the refundable portion of the credit was limited, which meant the lowest income parents lost out while higher income earners saw tax refunds.
"[T]here are no restrictions on families making up to $400,000 from receiving the credit," Warnhoff explains.
According to Warnhoff and the ITEP, Biden's plan would benefit America's most vulnerable families and "most families with children" but as Business Insider reports, a nonpartisan analysis from the Joint Committee on Taxation, a nonpartisan found this plan would cost $109 billion, a price tag critics are skeptical of.
It may be a wise investment, though. As noted in a recent study by the Center on Poverty and Social Policy at Columbia University, an investment in these tax credits would reduce child poverty for millions of kids and help Black and Hispanic children especially. The poverty rate could be cut in half for Black kids and reduced by 41% for Hispanic children.
Biden's campaign website gives a few real-world examples of what families would expect to see from this plan.
- A hypothetical teacher and an electrician with a 7th grader and a newborn would get $2,600 more than they do now.
- A nurse and a grocery store clerk with a 2-year-old and a 5-year-old would see an additional $3,200,
- A letter carrier and a childcare worker with a 3-year-old, a 5-year-old, a 7-year-old and a 9-year-old would take home an extra $5,200.
The plan will certainly have critics, but as families in the United States continue to suffer from the economic ramifications of COVID-19 it is something to consider.
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