- Biden’s stimulus bill contains a child tax credit for parents to receive up to $US3,600 ($4,671) per child.
- He wants a permanent credit, which could revolutionize families’ relationship with the government.
- Academic studies and similar programs in other countries suggest it would help cut child poverty.
- Visit the Business section of Insider for more stories.
Later this week, President Joe Biden is set to sign a $US1.9 ($2) trillion stimulus bill into law that would inject a massive amount of federal cash into nearly every part of the economy. Much of that direct aid would temporarily benefit people as the nation’s economy slowly begins recovering from the pandemic.
But the legislation also plants the seeds for what could be a major transformation of the nation’s social safety net for the lowest-income Americans. The bill contains a one-year provision to dramatically expand the child tax credit, which would allow for parents to receive up to $US3,600 ($4,671) per child.
Democrats aim to distribute this credit through monthly checks. Parents with children ages 5 and under could get a $US300 ($389) payment per child, while those with kids between 6 and 16 could get $US250 ($324) each month.
Some Democrats in the House and the Senate have said they will press to make it a permanent benefit program later this year. Biden told House Democrats last week he supported making the temporary beefed-up child tax credit permanent, though it’s unclear if that applies to monthly checks.
Democrats seem to be wagering that giving this credit to families for one year will be so popular that the case for making it permanent will be obvious.
Rep. Richard Neal, chair of the House Ways and Means Committee and one of the plan’s coauthors, told Insider he believed it would build a base of support among families. “Once it becomes policy, I think there’s an acceptance level for it,” Neal said.
There is some support on the right for this idea, too: Sen. Mitt Romney of Utah proposed a larger cash benefit for families last month.
Researchers at Columbia University projected the measure would form a key component in cutting the child poverty rate nearly in half, a statistic that Biden and other White House officials have cited repeatedly in recent days. The bill would also halve the poverty rate for Black and Hispanic children, according to the Columbia study.
If it does so, the policy may revolutionize the government’s relationship with families by offering a universal benefit to many with the potential to lift them out of poverty. That has been a key priority of Democrats for decades.
The relief package is “one of the most consequential and most progressive pieces of legislation in American history,” White House press secretary Jen Psaki said Monday.
‘Social Security for Children’
Democrats and progressives already see similarities between this child tax credit expansion and historic additions to the social safety net from the 1930s and ’60s during the presidencies of Franklin Roosevelt and Lyndon Johnson, respectively.
Rep. Rosa DeLauro of New York, the chair of the House Appropriations Committee and a main sponsor, compared the initiative to “Social Security for children” in an interview with The New York Times – essentially another program directed at providing a basic income to a specific segment of Americans.
Chuck Marr, the director of federal tax policy at the liberal-leaning Center on Budget and Progressive Priorities, drew a comparison between the proposed program and Johnson’s push to curb poverty through his “Great Society” program. Johnson’s goal was, as he put it in his first State of the Union address, “not only to relieve the symptom of poverty, but to cure it and, above all, to prevent it.”
Marr told Insider if the child tax credit became permanent, “it becomes a landmark achievement.”
Current law prevents many of the poorest families from tapping into the child tax credit that the federal government offers. The maximum amount for families with small tax bills is $US1,400 ($1,817), and nearly one-third of children live in families with earnings too low to qualify. The stimulus would make this tax credit fully refundable instead, meaning households could receive cash even if they had no tax obligations – but only for the duration of 2021.
If the child tax credit became a permanent fixture in the US economy, America would move closer to many Western European countries, including Germany and Sweden, which have a universal child benefit. Canada and Australia also have generous tax-free child benefit programs that phase out for top earners.
A permanent child tax credit along the lines of the stimulus would be on par with Luxembourg’s family allowance, which offers a standardized monthly amount of $US313 ($406) per child (this increases slightly at ages 6 and 12). It would be higher than Denmark’s $US732 ($950) quarterly allowance for children ages 0 to 2 and $US151 ($196) monthly allowance for those ages 15 to 17.
The other countries that offer such programs typically have lower child poverty. Denmark, which spends 20.9% of its GDP on social programs, has a child poverty rate of 2.9%, according to the Economic Policy Institute.
As of 2019, the US child poverty rate was 14.4%.
[Editor’s note: this report has been updated with remarks from House Ways and Means Chairman Richard Neal.]