the pros and cons of a new Republican plan

Children pull on top of a treasury check prop during a rally in front of the US Capitol on December 13, 2021.

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During the pandemic era, millions of families counted on monthly child tax credit checks of up to $ 300 per child, a program that expired last December.

Now a new Republican Senate proposal is aimed at resuming monthly payments to parents – with new requirements, however.

The proposal, called the Family Security Act 2.0, was created by the Republican Sens. Mitt Romney of Utah, Richard Burr of North Carolina and Steve Daines of Montana, who describe it as a “pro-family, pro-life and pro-marriage plan.”

The proposal follows the expiration of an extended child tax credit that gave families access to monthly child tax credit payments for the first time. This included $ 300 per month for each child under the age of 6 and $ 250 per month for each child aged 6 to 17.

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Monthly payments began in July and ended in December, with families receiving up to half of the credit’s total value of $ 3,600 per child under 6 and $ 3,000 per child aged 6 to 17 in cash. Families received the remaining credit when they filed their tax returns. year.

From 2022, the child tax credit returned to $ 2,000 per child under 17 with no advance monthly checks.

The 2021-expanded child tax credit has helped reduce child poverty by about 30% from December, as measured by monthly income, according to the Center for Budget and Policy Priorities.

“The research is so strong that children’s lives would be so much better – school, health, future earnings,” said Chuck Marr, vice president of federal tax policy at the Center for Budget and Policy Priorities.

“It had so much promise, it was such a big step forward,” he said. “So it’s awful that it has expired.”

The new Family Security Act 2.0 proposal is a “welcome development” showing that there is support for strengthening the credit available to low-income families, the Center for Budget and Policy Priorities said in a new analysis.

Yet, while this year could ‘create an opening’ for expansion, it has ‘significant weaknesses’, the group wrote of the proposal. Some children in low to no income families may receive partial child tax credit or no credit at all. In addition, a large reduction in the earnings-related income tax credit and other offsets could leave millions of children worse off, the Center for Budget and Policy Priorities has found.

The offices of the sponsoring Republican senators did not respond to requests for comment at press time.

How much money may families receive

Under the Republican Senators’ plan, families would receive $ 350 a month per child up to the age of 5, for a total of $ 4,200 a year. They will receive $ 250 per month for children ages 6 to 17, for a total of $ 3,000 per year.

The benefits will be limited to six children annually.

To receive the full benefit, families would have to earn $ 10,000 in the previous year. Those who earn less than $ 10,000 will have their credits reduced in proportion to their earnings.

The child tax credit will start phasing out at $ 200,000 in revenue for single files and $ 400,000 for joint files. For every $ 1,000 earned above those thresholds, the credit will be reduced by $ 50.

Expectant parents will also be eligible to start receiving payments four months before their child’s deadline. This will include monthly payments of $ 700, for up to $ 2,800 per pregnancy.

The earnings income tax credit, which provides a tax allowance to low- and moderate-income workers, will undergo reductions in both the phasing-in rate and the maximum credit available to single parents and married couples with children.

How the changes would be paid for

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The earnings tax credit cuts will result in an estimated annual savings of $ 46.5 billion.

The bill also calls for the elimination of the state and local tax deduction, which the proposal calls “an inefficient tax allowance for higher-income taxpayers”. That change is expected to generate $ 25.2 billion in savings.

It also proposes to get rid of the head of domestic filing status, which will save about $ 16.5 billion.

In addition, the elimination of the children’s section of the child and dependent care credit will cut another $ 4.7 billion annually.

In total, these changes represent an annual saving of $ 92.9 billion.

The ‘big weakness’ of the child tax credit

Under the current child tax credit, children in families with little to no income receive only a portion of the credit or no money at all. The Center for Budget and Policy Priorities calls it a “big mistake.”

That all changed last year when the U.S. Rescue Plan Act made the credit temporarily fully repayable, meaning it was fully available to children in low- to low-income families.

The estimated 30% decrease in child poverty since December included about half of all Black children, half of Latino children, one fifth of Asian children, one fifth of white children and about half of children living in rural areas, according to the Center for Budget and Policy Priorities.

Refusing credit to children based on their parents ‘earnings will not help increase their parents’ employment and hurt the children’s future, the group found.

Yet the Republican proposal has several strengths, according to the analysis. First, the credit stages accelerate as a family’s income rises and does so on a per-child basis.

Second, it also phases in the credit starting with the first dollar of earnings, rather than starting after the first $ 2,500 of earnings under current legislation.

Third, it also eliminates the current $ 1,500 limit that families can receive as a refund.

Parents from New Hampshire and others arrive outside Sen. on September 14, 2021. Maggie Hassan’s office in Manchester gathered.

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But there are other disadvantages to the plan, particularly with regard to cuts in the earnings-related income tax credit and the elimination of the head of household tax filing status, according to the Center for Budget and Policy Priorities.

For example, a mother earning $ 25,000 a year with a toddler and second-grade daughter would qualify for a $ 3,640 child tax credit, but would lose $ 4,105 due to the earnings-income tax credit reductions, resulting in a net income loss of $ 465, according to the Center on Budget and Policy Priorities. If both children were 6 or older, the net loss of income would be $ 1,665.

According to the Center for Budget and Policy Priorities, about 7 million families earning less than $ 50,000 would be worse off under the Republican plan compared to current legislation. The median loss will be more than $ 800 per family.

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