Like the debate continues on the best ways to revive the post-pandemic economy, attention in Washington has suddenly shifted to child poverty.
The US has a higher poverty rate than many other developed countries, including Australia, Russia and the United Kingdom. The Covid-19 pandemic has only exacerbated the economic divide, forcing more low-income families to do so rely on food banks and other forms of temporary help.
Over the past month, three major proposals have been made to address the growing problem of child poverty:
- President Joe Biden has proposed the temporary extension of the child discount (CTC) as part of its American Rescue Plan, increase the credit and make more of it repayable. Many Democrats may be in favor make the change permanent, but it requires future approval from Congress. Democrats in the House of Representatives are wrapping up details to support that plan, while another bill introduced in the House of Representatives this week, could serve as a backstop for that effort.
- Senator Mitt Romney (R-UT) introduced his Family Security Act proposal, which would give each household a monthly allowance for the children under its roofSome policy experts say Romney’s proposal is even cheaper than Biden’s plan.
- Sen. Cory Booker (D-NJ), along with Rep. Ayanna Pressley (D-MA), introduced a proposal to create ‘baby bonds’$ 1,000 savings accounts for every newborn in the country, with some children eligible for additional deposits of up to $ 2,000 per year.
This is what is in each plan and why all eyes are on this matter right now.
President Biden’s American bailout plan
Biden has proposed a temporary increase in the maximum CTC, up to $ 3,000 for each child 17 and under, and up to $ 3,600 for children under the age of six (credit is currently up to $ 2,000, and is Refundable only up to $ 1,400 per eligible childThe proposed credit would be repaid in full.
This week, Rep. Richard Neal (D-MA) rolled out details of some of the legislation that would formalize Biden’s plan.
The credit would be paid in monthly installments, although some analysts, including Matt Bruenig of the People’s Policy Project, have expressed concern as to whether the IRS currently has the resources to manage such a program. Other countries with similar monthly benefits have had issues with overpayments that have resulted in households having to repay their credit at the end of the year – something Neal said would be avoided with a ‘harmless amount’. That would mean that some applicants who are unduly overpaid would not have to repay that money, but only if they meet income restrictions.
The credit would start to wane for some tax applicants with one adjusted adjusted gross income (MAGI) of $ 75,000 or more per year; couples filing jointly would start to see a decline at an annual income of $ 150,000. Eligibility would be based on applicants’ 2019 or 2020 tax returns – whichever is the most recent – and an online portal would allow families to update their information if their income situation changes in the middle of the year.
This plan would only last for one year if the economy recovers. It suggests payments begin in July and Treasury Secretary Janet Yellen can determine a viable payment schedule. It is likely that you would receive about half of the enhanced CTC in 2021 and then claim the remainder on your 2021 tax return next spring.
“Biden’s proposal lifts an additional 4 million children above the poverty line in one fell swoop,” said Chuck Marr, senior director of federal tax policy at the Center on Budget and Policy Priorities. “But it’s only temporary, so he should have that done and then think about how to make it permanent.”
Meanwhile, some members of the House of Representatives announced a bill that’s comparable to the US bailout plan to expand children’s tax credit. It would also provide a monthly payment, but with higher income limits than Neal outlined. Unlike Biden’s U.S. bailout plan, the house bill would make the changes to the child tax credit permanent.
Senator Romney’s Family Security Act would replace the tax credit for children
Under Romney’s plan, a monthly cash payment would replace the CTC, which families receive once a year when parents and guardians file their tax returns. According to a Factsheet Family Security Act, the plan would lift nearly 3 million children out of poverty.
At the moment, the CTC offers up to $ 2,000 per year per childThe credit is only partially refundable, which means that if you qualify for the credit but don’t owe tax, you won’t receive the full $ 2,000 per child. In this case, you will receive up to $ 1400 as a tax refund payment.
The CTC also has income restrictions that disqualify some households if they don’t make enough money. About 27 million children low-income households receive partial or no credit at all.
Romney’s plan would give parents of children up to 5 years of age $ 4,200 a year and parents of children ages 6 to 17 $ 3,000 a year. On a monthly basis, eligible parents would get between $ 250 and $ 350 per child per month, with a monthly maximum of $ 1,250.
Monthly payments would provide many parents with limited resources with financial stability, allowing them to buy the necessary stuff or pay bills with the money each month, instead of waiting until the end of the year for a flat-rate tax refund.
The proposed Romney benefit would gradually disappear for households with an annual income of $ 200,000 for single filers and $ 400,000 for joint filers. The plan would be administered through the Social Security Administration, rather than the Internal Revenue Service (IRS), and would be available to all children with a Social Security number.
Romney’s plan would eliminate other social programs
Romney’s plan, which would be paid for by consolidating existing programs, will be funded through 2025, according to an analysis of the Niskanen Center
But how he will pay for it is also a disadvantage, according to Marr. “Romney expands the child tax credit on the one hand, but then claws back some of the profits for low and middle income people,” he says.
The plan would scrap several social programs such as the Childcare and Temporary Relief for Needy Families (TANF) credits. The plan would also eliminate the filing status of the householder, the SALT deduction (allowing some taxpayers to deduct state and local taxes from their federal tax returns) and adjust Supplemental nutrition utility (SNAP) Eligibility.
Senator Booker takes a different route: baby bonds
While there is growing consensus in Washington that families need more help to weather the economic impact of the pandemic, Booker takes another approach with its American Opportunity Accounts Act, more commonly known as “baby bonds.”
The account would create a $ 1,000 savings account for each newborn. Each year up to the age of 18, children from eligible income households would receive an additional $ 2,000. The money would yield an interest of about 3% per year, and once the child turns 18, they can use the money for various permissible purposes, such as paying for school, buying a house, or starting a business. Over a period of 18 years, those contributions compounded annually at the 3% interest rate can reach nearly $ 50,000.
Having that growing savings account ready and waiting for kids when they grow up would give the country a kickstart to close the racial wealth gap, according to Booker’s plan.
What is the future of the tax credit for children?
This isn’t the first time during the pandemic – or before – that lawmakers have talked about changing the CTC. The HEROES Act, passed by the House of Representatives in May, would have temporarily expanded the CTC, increasing the benefit amount and making it fully refundable. The American Family Act has previously been proposed in the House of Representatives, and Booker’s American Opportunity Accounts Act has previously been introduced in the Senate.
A fully repayable credit, or a credit based on a monthly stipend, would be in line with comparable developed countries. Many countries around the world that send payments to households with children, including Canada, Australia and most countries in the European Union. A family with two children in Ireland will receive about the equivalent of approx $ 4,000 USD per year, while in Australia a household with two children (when the children are 13-19 years old) gets about $ 9,500 USD per year
While critics say these types of allowances discourage parents from seeking employment and keep families dependent on government support, there is plenty of research to suggest otherwise. Families receiving benefits in Germany appear to be spending money more about food, and a study of the US Earned Income Tax Credit (EITC) found that parents-to-be were more likely to use prenatal care. And in Canada, the monthly allowance applies to children increased labor participation for women, who often bear the burden of childcare.
Knowing that they will receive monthly benefits can prompt adults to have more children or sooner. That could increase a birth rate that on the decline in the US. since the 1990s, and is expected to bottom out during the pandemic because families delay having children for fear of financial insecurity.
The call to replace the CTC with Romney shows a twofold interest in supporting children and families. But as the pandemic plans its feet for the U.S. economy in a second year, Romney’s overhaul may have to wait for consideration until another round of pandemic relief comes.
Romney submitted his proposal to amend the Senate budget resolution on Thursday, for which the vote lasted well into the night. But it was not one of those 41 changes the Senate voted to accept or discard of the 900 proposals in total.
Even without further consideration of Romney’s specific proposal, it is clear that lawmakers are thinking about ways to improve financial conditions for families during the pandemic and beyond. Even if Biden’s temporarily increased CTC is dropped from the final US bailout plan, Democrats’ hopes of expanding credit could continue through the American Family Act.
More Tags We LoveBachelor's Degree Training Online Free Chase southwest credit card offers Credit Cards for Poor Credit With No Deposit Instant Approval Credit Freeze Vs Lock And Alert Fast Cash Loans No Credit Check Near Me How long does it take to get capital one credit card How To Get A Credit Card With No Security Deposit How To Refinance Mortgage With Late Payments List Of Car Insurance Companies In Dallas Tx Will A Home Equity Loan Lower My Credit Score