The House of Representatives passed President Biden’s $1.9 trillion stimulus plan on March 10. The legislation, called the American Rescue Plan, will head to the president's desk for his signature on Friday in a final step before becoming law.
While most Americans are focused on getting their $1,400 stimulus checks, it’s the extension of the child tax credit in the relief legislation that really stands out as revolutionary policy, according to Pamela Stone, professor of sociology at Hunter College and Graduate Center, City University of New York, and author of the books “Opting Out” and “Opting Back In.”
The relief legislation expands the child tax credit to $3,000 annually per child aged 6-17 and to $3,600 for kids under 6 for single parents earning less than $75,000 annually, $112,500 for head of households, and $150,000 for married couples. (The current child tax credit is $2,000 per child under 17 for single parents or heads of household earning less than $200,000 or married couples making less than $400,000 annually).
The legislation’s enhanced child tax credit breaks the mold by directing the IRS to distribute periodic payments amounting to half the tax credit to low- and middle-income families this year.
If the Treasury Department decides to disburse those payments monthly, it would provide a guaranteed income for families in the form of $300 monthly checks per child under 6 and $250 monthly checks per child between 6 and 17 from July to December. (Parents who qualify would be able to collect the other half of the child tax credit when they file their taxes in 2021.)
According to Columbia University’s Center on Poverty and Social Policy, the enhanced child tax credit would reduce child poverty by 45% in the U.S. “I think this is a critical piece of legislation,” Stone told Yahoo Finance.
Stone said many parents will choose to spend the money on childcare, which she thinks will support women’s efforts to go back to work. Women are increasingly the primary breadwinners in their households, but they bore the brunt of job losses in 2020 as a result of the pandemic.
“The U.S. is the only country in the world that, for example, does not have paid family leave. That leaves a whole set of solving of the work/family dilemma up to the individual, usually women,” said Stone. “So with money, you can have resources to purchase, for example, child care.”
The enhanced child tax credit makes it possible for parents earning less than $2,500 in annual income, who previously didn’t qualify for the refundable part of the credit, to also receive payments from the IRS. “I think that Biden should be applauded for doing this and for targeting in particular the people who need it the most, middle and low income as opposed to upper tiered earners,” said Stone.
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