Congress Considers Boosting Child Tax Credit to Combat Economic Strain

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Politicians nationwide are well-informed by their constituents about the affordability crisis affecting American families. Families across income brackets are feeling a pinch from the shortage of affordable housing and high gas prices to the cost of daycare and higher education. The House of Representatives passed a bill 357-70, drafted by bipartisan lawmakers in the House and Senate, to expand the popular child tax credit and provide relief for families and businesses.

House Passes Bipartisan Bill to Expand Child Tax Credit

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Last week, the U.S. House of Representatives passed a bipartisan bill to expand the child tax credit to take some pressure off American families struggling to make ends meet. Millions of families in the low- and middle-income levels stand to gain from this expansion, which could put as much as $1,800 per child back into the pockets of parents to pay for their family’s expenses as early as the 2023 tax return. This is $200 more than the current limit of $1,600 refundable tax credits.

Who Benefits from Child Tax Credit

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Low-income families with multiple children could see the most benefit from this bill. Still, even middle-income families could find some relief as the benefit tapers off at higher income levels. If passed by the Senate and signed into law by President Biden, the bill could affect even 2023 tax returns.

How Many Households Benefit and By How Much

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Households affected by the expanded tax credit would benefit by paying up to $680 less per year to the IRS on average. The Tax Policy Center estimates that around 16% of Americans would benefit from a decreased overall tax bill.

Up to $2,000 Refundable Per Child by 2025

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The current child tax credit allows claims up to $2,000 per child, with up to $1,600 being refundable under certain conditions. If passed, the bipartisan bill would increase the amount available as a refund up to $1,800 for 2023 tax returns, $1,900 for 2024, and the full $2,000 for 2025 tax returns. Additionally, the bill allows the initial credit amount of $2,000 to be adjusted to account for inflation.

Requirements for Earned Income and Citizenship Status

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The House-passed expansion bill maintains a current requirement that a household earns at least $2,500 per year to be eligible, so a family must earn at least nominal taxable income to receive a refund check from the U.S. Treasury. Another requirement is that qualifying children must have a social security number and be an eligible dependent on their parents’ tax return.

Bill Addresses Access to Affordable Housing

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Access to adequate, affordable housing is another issue for many lower-income American families. The expanded child tax credit bill would also strengthen an otherwise unrelated tax credit for building and remodeling rental housing intended to benefit and house lower-income Americans. This tax credit is projected to increase affordable housing by about 200,000 units nationwide.

Bill Restores and Enhances Deductions for Business Investments

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The bill also includes three tax breaks for businesses and a restored ability to deduct investments in new equipment, machines, and research and development, starting immediately. Businesses also benefit from increased flexibility in determining how to deduct borrowed money.

Protects Families Receiving Payments from Certain Natural Disasters

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Finally, the House tax bill protects those affected by specific natural disasters, including the 2023 train derailment in East Palestine, Ohio, from being taxed heavily on disaster payments received.

Chances of Passage in the Senate and Signature from President

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It is unclear if the provisions in the bill will be considered wholesale in the Senate, taken apart and used as pieces in another legislative vehicle, or remain on the shelf this year despite general bipartisan support for expanding the child tax credit.

Opposing Motivations in an Election Year

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It is well-established that sitting presidents running for a second term in office want to hand out victories to voters, and few items are more appreciated by voters than checks and increased bank balances. Alternately, the party opposing the current president running for office has an interest in restraining such incentives from hitting voters’ mailboxes.

Points of Opposition

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The sticking points for those opposed to expanding this particular credit are related to the legislative process and politicians benefiting in an election year, as well as concerns about enabling specific populations to profit unfairly.

Claiming Credit in an Election Year

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The bipartisan deal was struck between Senate Democrats on the Finance Committee and the House Republicans on the Ways and Means Committee. Both committees would be critical advocates for the ultimate success of the legislation in their respective bodies. Meanwhile, House Democrats and Senate Republicans were not as integral at the negotiation table as they were minority parties in their legislative bodies and, therefore, unable to benefit from taking credit for popular legislation within their constituency, which is critical for getting reelected.

Regarding Eligibility of Certain Migrant Groups

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Some of those opposed to the legislation are concerned that there are not enough safeguards in place to ensure that the migrants who are newly paroled into the United States would not be eligible for both non-refundable and refundable tax credits. There is a requirement in place both currently and in new legislation that children must have a social security number and be an eligible dependent upon a claiming member’s tax return. However, not all parents of American citizens with a social security number are themselves legal citizens. These details will need to be worked out to garner even further bipartisan support.

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Currently, there are not many bipartisan activities taking place in Congress, making the passage of the expanded child tax credit a desirable goal. The progress could easily be derailed, however, by members of the Republican party who may not want to hand out an easy win for President Biden.

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