Halfpoint images | Moment | Getty Images
A Democratic proposal to extend the child discount for another year could net eligible families up to $ 300 per child per month.
But like all direct payments made by the government as part of the Covid aid, some wonder whether the aid will be too much or too little.
One of the strongest objections to the Democrats’ proposal came from Senator Marco Rubio, R-Fla., Who wrote in an op-ed this week that “it’s not a pro-family policy, no matter how many Democrats will claim it.”
The extension of the child tax credit is aimed at reducing child poverty. Research has shown that President Joe Biden’s plan could help cut the current rate in half, especially for minority families.
More from Personal Finance:
Unemployment Benefits: What Democrats Want in a Stimulus Package
Meet the student loan borrowers who refuse to pay their debts
Obamacare exchanges will reopen on Monday. How to get an affordable subscription
Still, others like Rubio are skeptical.
“If lifting families out of poverty were as simple as handing mothers and fathers a check, we would have solved poverty a long time ago,” Rubio wrote.
As with other direct payments, such as incentive checks, the debate over the structure of the child discount has focused on whether those who suffer most financially will really benefit from it.
Some experts say the Democratic plan could also enrich those at the top of the income thresholds.
How the Democrats’ child discount would work
The child tax credit helps parents to provide for their children financially below certain income thresholds.
Today, it is $ 2,000 per child for those who earn up to $ 400,000 if they are married and $ 200,000 if they are single.
Since it’s a tax credit, parents can lower their federal tax liability. (This is not to be confused with a deduction that reduces adjusted gross income.)
The House Democrats proposal, released this week, calls for the credit to be increased to $ 3,600 per child under the age of 6 and $ 3,000 per child for children up to age 17.
The bill would allow families to choose to receive monthly payments, rather than waiting for a set amount at the end of the year. Families can receive up to $ 300 per month per child under 6 and $ 250 per month per child ages 6 to 17.
To qualify for more full payments would be income based. So single parents with adjusted gross income up to $ 75,000, heads of household up to $ 112,500, and married couples filing together for up to $ 150,000 are eligible.
The credit would gradually disappear for those who rise above those levels where it would be lowered and then drop to $ 2,000 per child. It would be capped for individuals with an income of $ 200,000 and couples with $ 400,000, the same thresholds for credit today.
“The idea is that the current $ 2,000 people get per child will still be phased out the same way,” said Steve Wamhoff, director of federal tax policy at the Institute on Taxation and Economic Policy.
Protecting the credit for those who earn up to $ 400,000 is also consistent with Biden’s campaign promise not to levy taxes on people who earn less than that income.
Why should lower income households benefit?
The legislation also aims to change the existing rules to ensure lower income families have access to the credit.
To do that, the $ 2,500 minimum income will be dropped and the credit will be paid back in full. That would give access to families who are currently not receiving credit or a reduced credit.
“That represents a pretty big shift, I think, in the goal of what credit was trying to do,” which is to help working families, said Garrett Watson, senior policy analyst at the Tax Foundation.
It is estimated that such a change could almost or completely lift 9.9 million children above the poverty line. Many of the kids who would benefit from this would be Latino, African American, or Asian American.
Still, some conservatives have spoken out against the proposals.
Sen. Mike Lee, R-Utah, (left) and Senator Marco Rubio, R-Fla., At a Capitol Hill press conference on March 4, 2015, to introduce their proposal for a tax reform.
Rubio and Senator Mike Lee, R-Utah, released a joint statement this month calling on Congress to expand tax credits for children without “undermining the responsibility of parents to work to provide for their families.”
“We do not support converting the child tax credit into a so-called ‘child benefit’, which is paid out to all parents as a universal basic income,” said Rubio and Lee. “That’s not a tax reduction for working parents; it’s welfare.”
Together, the senators have submitted an alternative proposal to increase the credit to $ 4,500 per child under 6 and $ 3,500 for older children. However, work would be a major requirement under the plan.
Still other experts argue that the main point of the Democrats’ plan is to make money more accessible to families to help fight poverty. Therefore it would be counterproductive to link the benefit to the income.
“Is the goal to reduce child poverty or not?” Wamhoff said. ‘And if that is the goal, then you help families with children. It’s pretty straight forward. ‘
But since parents under the same $ 150,000 income threshold for married couples can also receive full $ 1,400 incentive payments for both them and their children, many families could expect a big payday if the current coronavirus relief package continues.
In total, some families could qualify for as much as $ 10,000 in direct payments, estimates Bill Hoagland, senior vice president at the Bipartisan Policy Center.
“I think we should do something,” said Hoagland. “But I think there should be better coordination and coordination here between direct payments and the child discount.”