Reps. Maxine Waters, Peter DeFazio, and Richard Neal
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Representatives have been meeting with Pres. Biden on American Rescue Plan

How the Enhanced Child Tax Credit Would Impact Families, Explained

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Feb. 10 2021, Published 12:44 p.m. ET

Members of the U.S. House of Representatives want to increase the current tax credit for families with children in a segment of the new COVID-19 relief package. While the current child tax credit is for $2,000 per child up to age 17, the new bill would give millions of families $3,000 per child in monthly payments for one year. 

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The Enhanced Child Tax Credit bill was introduced by Massachusetts Democratic Rep. Richard Neal. In order to help combat rising poverty rates, single parents earning up to $75,000 would be eligible for a $3,000 tax credit per child aged 6–17, and $3,600 per child under age 6. The income threshold would be $150,000 for a two-earner household.  

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How the enhanced child tax credit would work

The change in child tax credits is part of President Biden’s new coronavirus relief package. Advocates of the Enhanced Child Tax Credit say that families could receive payments monthly for one year beginning in July 2021. The payments would make it easier for them to manage monthly bills compared to a lump-sum credit at the end of the year.   

Rep. Neal told CNN that by paying the tax credit monthly, the money would be “the difference in a roof over someone's head or food on their table.”  

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How families would receive the enhanced child tax credit

If the bill passes into law, eligible U.S. families could receive an additional $1,400 in stimulus payments and an additional $3,000 child tax credit. Currently, the child tax credit is $2,000 per child, which reduces a family’s total tax bill. Families above the maximum income thresholds would phase out gradually from the benefits. 

If the Enhanced Child Tax Credit passes, instead of claiming the credit at tax time, families would receive monthly payments. Alexandra Cawthorne Gaines, vice president of the Center for American Progress’ Poverty to Prosperity program, told USAToday that the credit is meant to assist low and middle-income households. 

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The adjusted program would effectively lift over 4 million children out of poverty, according to Chuck Marr, the senior director of federal tax policy at the Center on Budget and Policy Priorities. 

The new tax credit would be refundable. Marr said in an NPR interview that “for low-income people who would not have a sizable income tax liability, their eligibility to the child tax credit is tied to their earnings.” The new proposal gives benefits to lower-income children, not only those from middle and upper-income families.  

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What needs to happen for the Enhanced Child Tax Credit to pass?

The American Rescue Plan would include coronavirus relief, increased unemployment benefits, and the Enhanced Child Tax Credit. It also includes expanding the earned income tax credit to apply to more low-income workers. 

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The Enhanced Child Tax Credit is housed within the American Rescue Plan and needs to pass both the House and the Senate. Support from both parties will be essential. There are already a good number of Republicans and Democrats in favor of the bill. 

Instead of only a one-year child tax credit expansion, some legislators are calling to make the expansion permanent. Connecticut Democrat Rep. Rosa DeLauro told CNN, “One year is not enough for the children and families battling not just the coronavirus, but poverty, too.” 

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