During the past year, families eligible for the expanded child tax credit received payments of $300 per child each month.
Checks for those payments stopped in January since they were only authorized for 2021.
Democrats have so far been unable to pass the Build Back Better package with a simple majority. According to CNBC, The bill would increase the maximum tax credit to $3,600 for children under 6 and $3,000 for children ages 6-17.
This year, eligible families may receive more child tax credits when they file their taxes since only half of the total credit was distributed by monthly payments.
The child tax credit will, however, be reverted to $2,000 per child in 2022, with no monthly payments.
There is still a possibility that lawmakers in Washington will revisit expanding the child tax credit. They may make changes that differ significantly from the aid they implemented last year.
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“The pandemic relief arguments for the child tax credit are no longer there,” said Tax Foundation economist Erica York.
“Now this is about done we want to make this fundamental change to the child tax credit long-term.”
Work Requirements are Up for Discussion
As part of the Build Back Better plan, the child tax credit would be fully refundable, which means families with little to no income could still receive the benefit.
According to the Tax Cuts and Jobs Act of 2017, the child tax credit phased in at 15% of earnings over $2,500 prior to the implementation of the expanded child tax credit. Added to that is 15 cents of the child tax credit for every $1 above the threshold, York said.
Providing full refundability through Build Back Better is estimated to reduce child poverty by more than 40%, according to the Center on Budget and Policy Priorities. Full refundability would also reduce child poverty by 87%.
Research from Columbia University shows that 3.7 million children became poor when child tax credits ceased to be paid on a monthly basis.
Meanwhile, some lawmakers, including Sen. Joe Manchin of West Virginia, have called for the credit to be tied to work requirements.
Utah Senator Mitt Romney is developing legislation that includes work provisions for child tax credits, in the hopes of gaining bipartisan support.
It has been argued by some experts that adding incentives to work is a bad idea.
According to Elaine Maag, senior fellow at the Urban-Brookings Tax Policy Center, people should first ask whether the expanded credit is intended for adults or for children.
“If they are truly intended for children, then the work requirement makes less sense,” Maag said.
Furthermore, if parents lose their jobs and income due to an expanded child tax credit, that would be “piling onto a bad situation,” she said.
According to Shai Akabas, director of economic policy at the Bipartisan Policy Center, lawmakers can split the difference in two ways, with a portion of it being fully refundable and available to all parents, and the other part phasing in with income.
According to the Bipartisan Policy Center, it has developed its own middle-of-the-road policy proposal that both sides of the aisle can accept.
“I think that is where the realistic path forward lies in terms of getting this enhanced tax credit renewed and making it available for families again,” Akabas stated.
Uncertainty of Timing
According to Akabas, the new credit likely won’t be as generous as the temporary credit that was put in place last year.
Additionally, there is no clear timeline for when the child tax credit will be extended again.
“I’m guessing we don’t see real movement on this until closer to summer, maybe May or June,” York stated.
Before November’s midterm elections, lawmakers may try to get something done.
However, child tax credit changes are also reviewed with provisions called extenders on an annual basis.
Parent’s may have to wait longer before monthly payments resume.
“American families have just been sitting on the sidelines watching the in party and across party bickering without any tangible progress,” Akabas said.