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Democrats face race against the clock to extend soon-expiring child tax credit payments

Party lawmakers fear a disruption to one of their signature aid programs as they continue to haggle with Manchin over their roughly $2 trillion package

Sen. Joe Manchin III (D-W.Va.), seen Nov. 30, 2021, on Capitol Hill, has raised concerns for months about the Build Back Better Act and has signaled he remains skeptical about federal initiatives that send checks directly to Americans. (Jabin Botsford/The Washington Post)
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A new federal program that provides monthly payments to an estimated 35 million families with children is set to expire at the end of December, putting fresh pressure on Congress if it hopes to preserve an initiative that President Biden sees as critical to combating poverty.

The aid is the result of an expanded, retooled child tax credit, which Democrats approved this past spring as part of their sprawling coronavirus relief package. Lawmakers grew the size of the benefit, ensured lower-income Americans could claim it fully on their taxes and allowed parents for the first time to collect the money in the form of monthly checks.

Democrats hope to extend each of those elements as part of their latest, roughly $2 trillion economic initiative known as the Build Back Better Act, which more broadly aims to overhaul the country’s health care, education, climate and tax laws. They say they intend to finalize their work in the Senate before Christmas, eventually sending the bill to Biden’s desk after the House adopted the measure in November.

Sen. Joe Manchin wants to restrict who gets the child tax credit. These West Virginians would be affected if he prevails.

But their ambitious timeline increasingly faces the prospect of sustained delays. For months, Sen. Joe Manchin III (D-W.Va.) has raised concerns about the size and scope of the tax-and-spending proposal. This week, he even appeared to take aim at programs including the child tax credit, signaling he remains skeptical about federal initiatives that send checks directly to Americans.

With much about the measure unresolved, the wrangling raises the prospect for disruptions in a program Democrats have come to call the Biden Child Tax Credit — a reflection of their belief that the monthly checks are a defining element of the president’s legacy and the party’s political philosophy. The payments are still slated to arrive, as scheduled, on Dec. 15. Without a legislative change, though, that is set to be the last payment, and the program come January will revert to its older, smaller state.

“Our country would not accept vulnerable senior citizens missing out on a Social Security payment,” said Sen. Ron Wyden (D-Ore.), the leader of the tax-focused Finance Committee. “Similarly it is not acceptable for vulnerable children and families to miss out on a child tax credit payment.”

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For years, federal law allowed parents to deduct up to $2,000 from their annual taxes for each child under age 17, though the exact amount they ultimately received would depend on a filer’s income and the amount of taxes they owed. For many lower-income families, the system generally provided an injection of cash every tax-filing season in the spring.

But Democrats expanded the program as part of the American Rescue Plan, which Biden signed into law in March. The revisions belonged to a broader set of spending measures that the White House pursued in a bid to give families a financial boost, particularly as they recovered from the coronavirus pandemic.

Under the stimulus law, lawmakers bumped up the size of the tax credits, allowing parents to deduct up to $3,600 for each child under age 6 and $3,000 for others ages 6 through 17. They also made it refundable, meaning that many low-income Americans — who might not have had enough income and tax burden to benefit from the full credit — could still receive the entire amount in the form of a refund.

Most parents use child tax credit on food, bills, and other necessities, survey finds.

And lawmakers put in place a novel system allowing families to take advantage of the aid well before they might normally file their returns. Beginning in mid-July, parents could receive monthly payments up to $300 for each eligible child, with deposits made directly into their bank accounts from the Internal Revenue Service.

In signing the bill into law, Biden in March asserted the expanded, retooled child tax credit could cut child poverty by as much as half. Over a series of studies, the left-leaning Center on Budget and Policy Priorities estimated this year that the initiatives could benefit more than 65 million children, particularly helping families who make less than $35,000 annually to cover the costs of food, clothing, housing and education. Democrats widely view the program as a runaway success, motivating many lawmakers to try to make it permanent.

“We’ve seen such success in five months, lifting millions out of poverty,” said Rep. Rosa L. DeLauro (D-Conn.), chairwoman of the House Appropriations Committee. “It cannot be undone.”

Yet Democrats at the time still opted against making the changes to the child tax credit permanent, because doing so would have greatly expanded the price tag of their $1.9 trillion relief law. Instead they set their sights on extending it as part of their subsequent efforts to enact Biden’s broader agenda — a process that since then has proved more difficult than some in the party once anticipated.

In the House, Democrats last month adopted their version of the Build Back Better Act, including a $190 billion effort that extends the expanded child tax credit and its monthly payments for just another year. The short-term extension amounted to a major concession to Manchin, whose opposition to the original plan would have doomed the entire package in the Senate.

Manchin at various points over the past year has questioned the wisdom of the child tax payments, called for their exclusion from the bill and raised the prospect that he would support the Build Back Better Act only if it includes work requirements for parents. Democrats largely balked at his ideas, but Manchin’s general apprehension about the price tag of the broader bill — initially set at $3.5 trillion — left his party little choice but to scale back what would have been one of its most expensive components.

In recent days, however, Manchin once again has sounded dour notes about the package — refusing repeatedly to endorse the Build Back Better Act even after Democrats whittled down its size and scope. Appearing onstage Tuesday at an event hosted by the Wall Street Journal, he questioned the “social” spending in the bill and raised concerns about its effects on inflation. He also took issue with the fact that Democrats limited the duration of some of their initiatives, including the child tax credit, in an attempt to save money — even though many in his party eventually hope to make the programs permanent.

“If we keep sending checks,” he said, “it’s going to be hard to stop the checks.”

Manchin did not respond to a request for comment. On Wednesday, he told reporters he could not offer a final judgment on the bill because he had not yet seen the final text.

Even without Manchin’s explicit support, Senate Democrats have started the process of shepherding the bill through the chamber, where they plan to rely on the intricate process known as reconciliation to sidestep a Republican filibuster. Other Democrats, meanwhile, increasingly have tried to pressure Manchin from the sidelines, making a loud, public case for swift Senate action to stave off any interruption in the tax payments.

The chairman of the House Democratic Caucus, Rep. Hakeem Jeffries of New York, described the program at a news conference Wednesday as “a lifeline for so many different American families.” At a time when consumer prices are rising, a major issue for Manchin, Jeffries said the continued aid would ease “some inflationary pressures to pay for child-care expenses, or educational expenses, or food or housing expenses.”

Across the Capitol, Sen. Tim Kaine (D-Va.) this week said he brought up the issue during a private party lunch. He said he called on his caucus to act swiftly to pass the bill and protect the payments — a comment, he said, that was met with “applause.”

“It doesn’t mean we have to pass a bill on December 16,” Kaine said, referring to the day after child tax credit recipients are set to see their final allotment. “But we’ve got to pass it sufficiently in advance of January 15, to make sure that families continue to get this child tax credit.”

In recent days, IRS officials have communicated to Capitol Hill that they probably need clarity by Dec. 28 on the future of the program. Otherwise, the tax agency is unlikely to be able to make payments on time for Jan. 15 in the event Congress finalizes the law before the end of the year, according to two people familiar with the matter who spoke on the condition of anonymity to describe the conversations.

Wyden, as the leader of the Senate’s top tax committee, said the trouble stems from the significant logistical requirements that come with administering the aid program at a time when the IRS is also preparing for the new tax-filing season.

“We’re focused on getting the entire caucus behind this,” said Wyden, who spoke with Biden directly on Tuesday to discuss the fuller spending package. “We are working as a caucus to get this done.”

Yet a slew of Democrats already have set their sights on next year, looking beyond the debate over Biden’s signature spending package as they argue for making the child tax credit changes permanent. That work will begin “as soon as we get this done,” said Rep. Suzan DelBene (D-Wash.), the leader of the moderate-leaning New Democrat Coalition in the House.

“We’ve seen the impact the child tax credit has had on families,” DelBene said. “We need to keep that going.”