Little one Tax Credit score: Thousands and thousands of oldsters might quickly stand up to $ 3,600 per little one

The US $ 1.9 trillion rescue plan, signed by law by President Joe Biden, aims to achieve the pandemic-hit economy through tax measures such as extended unemployment benefits and direct economic stimulus measures. But the legislation also contains a relatively novel measure that offers parents of children under the age of 18 some form of guaranteed income, or what one expert calls “a small step towards a universal basic income”.

That’s because the bill includes a revision of the Child Tax Credit (CTC), a 24-year-old part of national tax law that now primarily benefits middle- and higher-income families. The American Rescue Plan is redesigning the CTC by increasing the benefit from $ 2,000 per year to up to $ 3,600 per child. It also encompasses more low-income households and distributes the benefit of the loan through monthly cash payments.

These changes could have a significant impact on millions of families, particularly low-income households and households whose income can fluctuate from month to month. According to an analysis by the Center for Budgetary and Policy Priorities, more than 4 million children could be lifted out of poverty, especially children from black or Latin American families.

The expanded CTC will require approximately $ 100 billion in additional federal spending. Columbia University researchers estimate that better children’s health and long-term outcomes will generate more than $ 800 billion in societal benefits.

“It’s a big deal,” said David Wessel, director of the Hutchins Center for Tax and Monetary Policy at the Brookings Institution. “This is one of the most important steps we have taken to lift children out of poverty. In many other countries, the government subsidizes families with children because they are the ultimate investment in the future.”

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Wealthy countries like Sweden and Ireland provide “child benefits” – direct payments to families to cover the cost of raising children. With the revision of the CTC, the United States will work with these countries to provide direct assistance to families with children on a regular basis, albeit temporarily.

“We belong to the same league as other western capitalist democracies,” added Wessel. “It’s a small step towards a universal basic income or a guaranteed income and it will be interesting to see how it works in practice and how it is perceived by the public.”

Up to $ 3,600

The CTC has helped millions of families over the years, but its quirky design meant that it sometimes bypassed the poorest families. Families who owed little or no income tax were only entitled to up to $ 1,400 per child, rather than the $ 2,000 granted to wealthier families, according to the Brookings Institution.

About 27 million children are currently not getting full tax credits, said Kris Cox, assistant director of federal tax policy at the Center for Budget and Policy Priorities. “The current design of the child tax credit is upside down,” added Cox.

This created a one-sided impact as lower-income families are less likely than wealthier families to benefit from the tax credit. In fact, about 40% of the tax credit went to families earning more than $ 100,000, while only 15% went to households with incomes less than $ 30,000, according to Brookings.

“We want tax laws to skyrocket our low-income families, and it hasn’t,” said Joanna Ain, assistant director of politics at Prosperity Now, a nonprofit focused on expanding economic opportunities for Low-income households concentrated.

Under the American Rescue Plan, the CTC is increased to $ 3,600 for each child under 6 years of age and to $ 3,000 for each child between the ages of 6 and 17 (previously excluding children 17 and over) Income families, which is a shift from previous boundaries for poor families.

The provision also contains income restrictions for households with higher incomes, similar to the income thresholds of the stimulus checks. Single taxpayers earning up to $ 75,000 and married couples earning up to $ 150,000 would receive full credit of either $ 3,000 or $ 3,600 per child, but payments would be reduced for those with incomes above those thresholds.

Families earning too much to qualify for the extended tax credits could still claim the $ 2,000 base credit for their children provided their income is below the current thresholds of $ 200,000 for single taxpayers and $ 400,000 for married couples .

Monthly payments – for a while

Other than these changes, the CTC is sometimes paid monthly and not claimed once a year when individuals file their tax returns. In other words, a family with two children under the age of 6 would be eligible for CTC payments of $ 7,200 or monthly payments of $ 600.

But there is one problem: monthly payments only run from July to December this year, with the other half of the CTC being paid when people file their tax returns. In other words, households would receive six months of monthly income and then receive the remainder of the CTC through their tax refund.

Even so, getting a guaranteed monthly income for halfway through 2021 could mean a change for many low-income families, experts say. Low-income households are particularly hard hit by the economic impact of the pandemic, in part because they are more likely to work in jobs that couldn’t switch to remote work.

“We see so much volatility in someone’s paycheck all year round, especially the paychecks of low-income families,” Ain said. “The stability of having a sum of money every month will improve their quality of life.”

The child tax credit extension is only slated for one year, which means the program may revert to its previous form in 2022. However, policy experts hope lawmakers can extend the extension, especially if it proves popular with voters. If the provision is not extended, millions of families could see recurring aid end after the holidays.

Of course, the Biden administration and some Congress Democrats have confirmed their goal make the extension permanentAs part of their Build Back Better agenda, they are signaling that investing in children pays off with an overall stronger economy.

“These things don’t tend to go away,” remarked Wessel as soon as they are in place.

Sarah Ewall-Wice of CBS News contributed to this report.