The Biden administration is set to unveil its American Families Plan on Wednesday ahead of the president’s address to a joint session of Congress. It’s expected to include some kind of extension to an expanded child tax credit.
Under the recently-passed American Rescue Plan, American families making up to $150,000 will get a monthly check of up to $300 per child, starting sometime after July 1. The law instructed the Internal Revenue Service to send out the money from the tax credit in advance, in essence creating a child allowance ― but only for this year.
Biden’s economic advisers have floated a four-year extension to the increased benefit as part of their multi-trillion-dollar proposal to prop up American families. The American Families Plan would also boost child care, paid family leave and other public benefits, with the costs offset by tax hikes on the rich.
Democrats in Congress seem increasingly annoyed by the idea of a temporary extension of the higher child credit, calling it the most important policy they’ve enacted in decades. But it costs roughly $100 billion per year, meaning at least $1 trillion in the standard 10-year budget window.
“Now is the time to make this permanent,” Rep. Rosa DeLauro (D-Conn.) said on a conference call with reporters. “We can’t afford to let this moment pass.”
Entrenching the monthly payments for parents would be about more than just lifting kids out of poverty and making life easier for parents ― doing so would be just plain democratic, according to Sen. Michael Bennet (D-Colo.).
“President Biden can unify the country and earn the confidence of the American people by responding to their needs,” Bennet said.
And setting up the expanded credit to expire after 2025, when a host of Republican-sponsored tax breaks also expire, would give Republicans a policy hostage, according to Sen. Sherrod Brown (D-Ohio.).
“Whenever we pass something that gives people a little more economic security, the conservative corporate elite go after it,” Brown said. “We know in five years that they will come after it and they will want huge corporate tax cuts.”
If Democrats decide to pass the American Families Plan through budget reconciliation, a legislative maneuver that allows them to get bills through the Senate with only Democratic support, they will still need to find a way to fully pay for the expanded tax credit.
Reconciliation bills are not allowed to increase the deficit outside a set time frame. Further complicating the math for Democrats is Republicans’ 2017 tax law. Republicans doubled the child tax credit to $2,000 a year, but only until 2025. The current cost projections for Democrats’ proposal is based on the 2017 baseline, meaning that after 2025, the price tag of this proposal will increase significantly.
Still, Democrats think they have ways to raise enough federal revenue to offset these costs, citing Biden’s proposal to boost funding for IRS audits of wealthy taxpayers. Charles Rettig, the IRS commissioner, told Congress earlier this month that the agency fails to collect as much as $1 trillion annually because of how Congress has crimped its budget.
“We believe we will be able to square those numbers,” DeLauro said.
And as to the cost, Democrats pointed out that according to a landmark study by the National Academy of Sciences, child poverty itself costs the nation more than $800 billion annually in terms of lost productivity and increased expenditures on criminal justice and health care. Every dollar that goes to poverty reduction, Democrats said, adds eight dollars to the economy.
DeLauro and Brown declined to say whether they would withhold their votes from the American Families Plan if the Biden administration refused to support a permanent child credit expansion.
“I’m not entertaining that at the moment,” DeLauro said. “We will add this in the House and we will provide an opportunity for paying for it as well.”