A bipartisan, bicameral pair of powerful committee chairs have a deal to resurrect (at least partially) the COVID-era child tax credit expansion that raised millions of children up out of poverty. The plan is part of a larger tax proposal agreed upon by Democratic Sen. Ron Wyden of Oregon, who is chair of the Senate Finance Committee, and House Ways and Means Committee Chairman Jason Smith, a Missouri Republican.
“Sixteen million kids from low-income families will be better off as a result of this plan, and given today’s miserable political climate, it’s a big deal to have this opportunity to pass pro-family policy that helps so many kids get ahead,” Wyden said when announcing the agreement, which would expire in 2026. The plan would expand the credit to families whose income is too low to receive the full child tax credit. It would also raise the refundable cap on the tax credit from $1,600 per child to $1,800 for the 2023 tax year, to $1,900 in 2024, and $2,000 in 2025.
Wyden didn’t pull that 16 million figure out of thin air. The Center on Budget and Policy Priorities analyzed the plan, saying the lawmakers’ “top priority is getting more of the credit to most of the roughly 19 million children who currently get a partial credit or none at all because their families’ incomes are too low.”
“The expansion would meaningfully reduce child poverty,” CBPP wrote. “In the first year, the expansion would lift as many as 400,000 children above the poverty line. 3 million more children would be made less poor as their incomes rise closer to the poverty line.”
The proposal is smaller than the American Rescue Plan tax credit expansion passed by Democrats in March 2021. The monthly payments in the pandemic relief program brought a record drop in child poverty rates, keeping about 3 million children from poverty in a matter of a few months. That was before Republicans, along with Democratic Sen. Joe Manchin of West Virginia, killed it, refusing to extend the program in 2022.
The effects of that expansion expiring were totally predictable: Millions fell back into poverty immediately. “January 2022 marked the first month that the American Rescue Plan’s expanded Child Tax Credit monthly payments expired, and child poverty rates increased sharply in response,” the Center on Poverty and Social Policy reported in early 2022. “Monthly child poverty is 4.6 percentage points (38 percent) higher in February 2022 than December 2021, representing 3.4 million additional children in poverty in February relative to December,” the report said.
The expansion helped families cover household expenses and pay down debt, according to a Census Bureau survey. It found that 59% of families bought food with the money, 52% made utility payments, 45% paid the rent or the mortgage, 44% bought clothing, and 40% paid education costs.
This proposal won’t help as much as the Rescue Plan’s expansion, but it will still provide relief to millions. Wyden and Smith hope to see it passed in time for filing 2023 tax returns, but other Republicans—not wanting to give Democrats anything they can claim as a victory in an election year—might not let that happen. The tax bill has to start in the House, and Speaker Mike Johnson has made no commitments to bring it to the floor.
Senate Republicans aren’t any more enthusiastic about it, already plotting their poison pills. “Senate Republicans expect that if and when a deal passes the House, it would go through regular order in the Senate and receive a robust amendment process over here,” a senior Republican aide told The Washington Post.
Pandemic relief spurred record drop in poverty in the U.S.
Child tax credit's expiration had a swift and totally predictable outcome
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