With the child tax credit, Democrats have sought to extend the life of a policy that Biden and top party lawmakers have described as essential to addressing poverty. If adopted, it would allow families to benefit from a credit of $3,000 for each child between ages 6 and 17, and $3,600 for each under age 6. Families could receive those sums in monthly installments, rather than waiting until they file their taxes annually to claim the benefits.
Democrats first re-engineered the child tax credit as part of the $1.9 trillion coronavirus relief measure they adopted earlier this year, saying a higher payment on a monthly schedule could provide Americans a critical financial boost in the midst of the pandemic. That law also made the tax credit fully refundable, allowing families to collect the total amounts even if they do not owe any taxes to the federal government.
The proposal put forward late Friday extends those benefits until 2025, though they would continue to be refundable. The policy stops short of the full, permanent reauthorization that lawmakers including Rep. Richard E. Neal (D-Mass.), the chairman of the House Ways and Means Committee, had sought initially.
Neal still stressed, however, that the extension would make a great difference for families in financial need — especially in combination with the other tax benefits his panel plans to consider Tuesday.
“Taken together, these proposals expand opportunity for the American people and support our efforts to build a healthier, more prosperous future for the country,” he said in a statement.
The tax proposal arrived late Friday after a frenzied week of work on Capitol Hill, as Democrats raced to draft what could be the largest economic package in U.S. history. The $3.5 trillion plan is a rethinking of the nation’s health-care, education, immigration and tax laws, and it would fulfill some of the core promises Democrats made during the 2020 presidential campaign.
Over the past week, Democrats adopted new social safety net programs, including 12 weeks of paid leave for millions of Americans who lack access to such a benefit. Democratic lawmakers took their first steps toward expanding Medicare so that seniors could perhaps soon obtain dental, vision and hearing coverage. And they approved billions of dollars to improve schools, boost child-care programs and provide free prekindergarten for all children ages 3 and 4.
But Democrats also clashed among themselves over the size and scope of their efforts, signaling even tougher fights still to come over the $3.5 trillion package. In recent days, moderates including Sen. Joe Manchin III (D-W.Va.) have reaffirmed their insistence that lawmakers should spend less. In the House, Democrats including Rep. Stephanie Murphy (Fla.) have raised new concerns about how their party’s legislators plan to finance the new endeavors. The issue of paying for the programs remains unsettled among Democrats, who have discussed raising taxes on corporations, wealthy families and investors to pay for their new package — but haven’t figured out exactly how to do so.
In its proposal late Friday, the House Ways and Means Committee sidesteps those thorny questions, putting forward instead a collection of tax credits and other spending that is vast in scope.
It includes new tax credits to try to boost clean energy, including credits that incentivize renewable sources such as wind and solar, with additional benefits for facilities that have zero carbon emissions. Other energy tax credits target Americans, incentivizing them to make their homes more energy efficient or to buy new or used electric vehicles and bicycles.
On health care, meanwhile, Democrats have proposed using the tax code to try to make health insurance more affordable. They introduce or make permanent a number of tax credits intended to reduce the cost of purchasing insurance under the Affordable Care Act. Those include credits adopted in the most recent stimulus legislation.
A significant portion of their proposal on health care seeks to lower prescription drug prices for millions of American seniors. For the first time, the U.S. government could negotiate drug prices on behalf of the program’s beneficiaries, a move that Democrats say would reduce costs. That proposal has set off a lobbying blitz by pharmaceutical giants that contend it would discourage innovation.