Future child tax credit payments may come with work requirements

Parents and children take part in a protest organized by the ParentsTogether Foundation in support of the child tax credit portion of the Build Back Better Bill outside the United States Capitol on December 13, 2021.

Sarah Silbiger | Bloomberg | Getty Images

When President Joe Biden delivers his State of the Union address on Tuesday, he could tout the benefits of a pending social spending package that could bring in more money for Americans.

Biden may offer to expand the expanded child tax credit that came with monthly payments of up to $300 per child to eligible families last year.

These checks stopped in January, as payments were only authorized for 2021.

So far, Democrats have failed to pass the Build Back Better program by a simple majority, which would increase the maximum credit by $3,600 per child under six and $3,000 for children under the age of six. 6 to 17 years old.

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Families eligible for the expanded credit could see more money coming their way when they file their taxes this year, as only half of the total child tax credit has been sent through monthly payments.

However, for 2022, the credit is back to $2,000 per child with no monthly payments.

Washington lawmakers may yet reconsider expanding the child tax credit. But the changes they could make could be very different from the aid put in place last year.

“The pandemic relief arguments for the child tax credit are gone,” said Erica York, an economist at the Tax Foundation. “Now it’s a question of whether we want to make this fundamental change to the child tax credit in the long term.”

Debating work requirements

New Hampshire parents and others gather outside the Manchester office of Senator Maggie Hassan on September 14, 2021.

Scott Eisen | Getty Images Entertainment | Getty Images

The Build Back Better plan proposes to make the Child Tax Credit fully refundable, meaning families with little or no income would still be eligible for the benefit.

Prior to the implementation of the expanded child tax credit, the credit was phased in to 15% of income over $2,500, in accordance with the Tax Cuts and Jobs Act of 2017. Every dollar above that threshold equals 15 cents of child tax credit, York says.

The full reimbursement provided by Build Back Better — along with the higher total sums per child — could reduce child poverty by more than 40%, according to the Center on Budget and Policy Priorities. Full refundability would represent 87% of this amount.

Research from Columbia University found that 3.7 million children fell into poverty after monthly Child Tax Credit payments stopped.

American families just sat on the sidelines watching the squabbles within and across the party with no tangible progress.

Shai Akabas

director of economic policy at the Bipartisan Policy Center

Still, some lawmakers, particularly Sen. Joe Manchin, DW.V., have said they want the credit tied to work requirements.

Sen. Mitt Romney, R-Utah, is working on a child tax credit proposal with working provisions that he hopes can attract bipartisan support.

Some experts disputed the addition of work incentives.

The first question people need to ask is whether expanded credit is for adults or children, according to Elaine Maag, senior fellow at the Urban-Brookings Tax Policy Center.

“If they’re really aimed at children, then the work requirement makes less sense,” Maag said.

Also, if parents lose their jobs and therefore their income through an expanded child tax credit, it would “make a bad situation worse”, she said.

According to Shai Akabas, director of economic policy at the Bipartisan Policy Center, there are ways lawmakers can split the difference, with one part being fully refundable and eligible for all parents, and a second part being phased into income.

The Bipartisan Policy Center has come up with its own interim proposal to encourage a policy that both sides of the aisle could sign onto.

“I think that’s where the realistic path lies in terms of renewing this enhanced tax credit and making it available to families again,” Akabas said.

Temporal uncertainty

Any new credit enacted is unlikely to be as generous as the one that was temporarily put in place last year, Akabas said.

Additionally, it is currently up in the air when the child tax credit could be expanded again.

“I guess we don’t see any real movement on this until the summer, maybe May or June,” York said, as Congress has other priorities, such as government funding or a draft bill. law to regulate China’s economic competition.

Lawmakers could aim to do something before November’s midterm elections.

However, child tax credit changes can also be grouped together with provisions called extensions that are reviewed annually.

For parents, this will mean a longer wait before monthly payments eventually start again.

“American families just sat on the sidelines watching the feuds within the party and across the party with no tangible progress,” Akabas said.