Stimulus: Expanded child credits reach bank accounts
Millions of American parents started receiving monthly cash disbursements from the federal government last week, said Annie Lowrey in TheAtlantic.com. The child tax credit of $300 per month for each child 5 and under and $250 for those 6 to 17 is part of the $1.9 trillion 2021 stimulus plan, and will feel new to Americans who are accustomed to a raft of restrictions on federal aid. Unlike earlier tax credits, there are no minimum earnings requirements, and “there are no drug tests, work requirements, or asset tests.” This is a “guaranteed income for kids” that this year is expected to lift 4.1 million children above the poverty line.
The payments reflect an expansion of the regular child tax credit, which started at $1,000 in 1997 and doubled to $2,000 per child in 2017, said Laura Saunders in The Wall Street Journal. In addition to the increase in amounts, a key difference from prior years is that families “don’t have to wait to claim them on tax returns.” However, this could complicate the tax picture for some high-earners. For instance, “a married couple with two children over age 5 and $220,000 of income” that got a $500 refund in 2020 will be getting about $333 a month this year, thanks to their permanent credits. But they could owe the IRS $1,500 next spring.
Some taxpayers may even be better off declining monthly checks, said Katie Teague in CNET.com. “Those who choose to decline this year’s child tax credit installments will still receive the same amount of money in the end.” This could be helpful in the case of “families saving up for a big expense” or wishing to pay down debt. The tax credits received this year are also based upon 2020 or 2019 tax returns. So, if you know your household income has gone up (or a child in your family turns 18) in 2021, “you don’t want to worry about paying that money back.”
Discussions about extending Biden’s tax credit have already started, said Karl Smith in Bloomberg.com. The Democrats’ budget blueprint for next year includes the expanded child credit, and many lawmakers want to make it permanent. “In general, the idea of expanding support for families commands strong bipartisan support.” But progressives and conservatives differ on the reasons for their support. For many progressives, the only metric to determine if the payments are successful is “whether the program reduces child poverty.” Conservatives, on the other hand—such as Sen. Josh Hawley (R.-Mo.), who has pushed for a credit that would give $12,000 to married couples and just $6,000 to single parents—“see enhanced support for children as a way to encourage the traditional family structure.”