Though a group of Democratic lawmakers and progressive advocates pushed hard to partially restore an enhancement to the child tax credit, the measure did not make it into the $1.7 trillion federal spending package.
The coalition’s priority was to increase the refundability of the credit so more of the lowest-income families could qualify, as they did last year thanks to the Democrats’ $1.9 trillion American Rescue Plan’s temporary expansion of the credit.
Nearly 19 million kids won’t receive the full $2,000 benefit this year because their parents earn too little, according to a Tax Policy Center estimate.
“Republican leaders decided to send a lump of coal to America’s children this year,” said Colorado Sen. Michael Bennet, one of the effort’s leaders in the Senate. “We know that the most significant step Congress can take to help America’s children is to support an expanded Child Tax Credit. When Congress took action on this in 2021, we cut childhood poverty in America in half.”
Bennet, along with Democratic Sens. Sherrod Brown of Ohio and Cory Booker of New Jersey, had hoped to convince GOP lawmakers to back the inclusion of the provision in the spending bill by tying it to corporate tax breaks that Republicans and businesses support.
The last-ditch effort faced several challenges. At least 10 Republican senators would have had to sign on for the measure to pass the chamber, and that’s assuming it had the support of Democratic Sen. Joe Manchin of West Virginia, who last year torpedoed an extension of the expanded child tax credit, along with much of President Joe Biden’s social spending package.
The failure to include the enhancement in the spending bill effectively ends its chances of passage, at least in the near future. Republicans, who don’t support increasing the credit’s refundability, are set to take control of the House in January.
Though the child tax credit has long enjoyed bipartisan backing, GOP lawmakers have been wary of making it fully refundable because they claim it could discourage parents from working.
The 2021 enhancement
The American Rescue Plan made three significant changes to the child tax credit for 2021. It increased the maximum credit to $3,600 for children under age 6 and $3,000 for those ages 6 through 17. Heads of households earning up to $112,500 a year and married couples making up to $150,000 were eligible for the full amount.
Also, it made the credit fully refundable so the lowest-income families could qualify. And it sent half the credit to families in monthly installments of up to $300 from July through December last year to help them cover expenses. They could claim the other half on their 2021 tax returns.
More than 36 million families with more than 61 million kids received monthly payments, which totaled more than $93 billion, according to the Internal Revenue Service.
Prior to the expansion, eligible parents received a credit of up to $2,000 for children up to age 17 when they filed their taxes. That is what is in effect for 2022 since the enhancement has expired.
The expansion lifted 2.1 million children out of poverty in 2021, according to the Census Bureau. It helped drive child poverty to 5.2%, a drop of 46%, according to the bureau’s Supplemental Poverty Measure.
Also, food insecurity dropped and families said they could more easily afford their household expenses while the monthly payments were being delivered.