Everyone's currently engrossed in discussions about the child tax credit.
Democratic Vice President nominee Kamala Harris has emphasized enhancing the child tax credit as a crucial aspect of her recently introduced four-part strategy to lessen expenses for American families. This strategy also includes measures to lower the prices of housing, food, and prescription drugs. Harris aims to reinstate the 2021 American Rescue Plan Act's enhanced credit of up to $3,600 per child, which was effective for only one year, and introduce a $6,000 credit for newborns.
Ohio Senator JD Vance, the Republican vice presidential candidate who frequently criticizes Democrats for being anti-family, suggested to CBS News that he would favor increasing the child tax credit to $5,000 per child, although he would need to evaluate its feasibility in Congress. Former President Donald Trump, who is leading the ticket and whose daughter successfully advocated for expanding the credit during his first term, has also expressed support for a generous child tax credit.
Josh McCabe, director of social policy at the Niskanen Center, remarked that boosting the child tax credit's amount is the most straightforward approach to appease voters. The credit is not limited to a particular need, unlike the child care credit, for instance. "With the child tax credit, families see it as being able to spend it on whatever they want," McCabe stated.
Vance and Democrats have exchanged attacks concerning the credit, with Harris falsely asserting that Democrats aim to eliminate the benefit, and Democrats charging Vance for missing a vote that would have temporarily expanded the credit temporarily.
The White House occupant will need to address the child tax credit in the coming year since it is set to revert to a maximum of $1,000 in 2026, decreasing from the current ceiling of $2,000 established by the Republicans' Tax Cuts and Jobs Act of 2017. The credit is one of numerous individual income tax provisions in the legislation that expire at the end of the following year.
Here's what you need to know about the child tax credit:
What constitutes the child tax credit?
The child tax credit, which approximately 46 million families claimed in 2022, was passed by a Republican-led Congress and signed into law by then-President Bill Clinton, a Democrat, in 1997. It was a reasonably modest tax credit for middle-income families designed to alleviate the financial burden of having children, according to Margot Crandall-Hollick, a principal research associate at the nonpartisan Tax Policy Center.
“The child tax credit is popular with families, and due to that, it’s popular with politicians,” Crandall-Hollick said, noting that nearly 90% of families with children received the credit in 2022.
Originally, the credit of up to $500 per child was nonrefundable, meaning that parents had to earn enough to pay federal income taxes to receive it. However, it also began to phase out for single taxpayers with incomes above $75,000 and married couples with income above $110,000.
Since then, the credit has been expanded in various ways, including increasing its size to as much as $2,000. It is now partially refundable, allowing lower-income families to receive at least a portion of the credit as long as they earn at least $2,500, even if they do not owe federal income tax. Additionally, more higher-income families are eligible since the credit now begins to phase out for single parents with income of $200,000 and married couples earning double that amount.
However, all of this changes in 2026, when the $1,000 maximum credit and lower phase-out thresholds return if Congress does not act. Moreover, low-income families must earn at least $3,000 to qualify.
The candidates' intentions
By reinstating the American Rescue Plan enhancement, Harris would significantly increase the size of the child tax credit and make it accessible to millions more low-income families by making it fully refundable.
The Covid-19 pandemic relief law increased payments for lower- and middle-income families to as much as $3,600 for each child aged up to 6 and a maximum of $3,000 for each child aged 6 to 17. Furthermore, for the first time, half the credit was paid in monthly installments from July to December 2021 to help families cover their expenses, and parents could claim the remaining half when they filed their 2021 taxes.
The enhancement reduced the child poverty rate nearly in half in 2021, lifting 2.1 million children out of poverty, according to the US Census Bureau – although the rate returned more or less to its pre-pandemic level the following year.
Harris would also add a $6,000 credit for children in their first year of life to help cover costs such as car seats and diapers. She has not disclosed the income threshold for this credit.
“There’s one more way I will assist families in dealing with rising costs, and that’s by allowing you to keep more of your hard-earned money,” Harris said in a recent speech unveiling her economic platform, which her campaign noted would provide tax relief to over 100 million Americans.
Vance, however, has not provided any details about increasing the credit but stated on CBS News' "Face the Nation with Margaret Brennan" that the $5,000 credit should be universally available.
"I don't believe you're down for this huge reduction in benefits for lower-income families you've got going on currently," he stated. "You're not looking for a different policy for wealthier families, but instead, you're pushing for a family-friendly child tax credit, correct?"
During a different interview with CBS News, Trump was queryed about boosting the credit to $5,000, as his vice-presidential nominee suggested. Trump expressed his support for "the max" but stressed that it would require negotiations in Congress.
The increase in the credit's scope has been a contentious issue among legislators at a time when the national debt is escalating. Harris' proposal might tack on about $1.2 trillion to the federal deficit over the next decade, while Vance's idea might set back the budget by anywhere between $2 trillion and $3 trillion over that period, according to Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, who mentioned that the estimates could shift if the candidates supply further information about their ideas.
President Joe Biden and congressional Democrats have failed repeatedly to prolong the 2021 expansion or pass a more modest improvement. Senate Republicans scrapped a bill last month that would have granted a larger credit to low-income families, as well as reinstated certain business tax incentives. The legislation garnered bipartisan support in the House earlier this year.
In response to the Republican vice presidential candidate JD Vance's suggestion to increase the child tax credit to $5,000 per child, Democratic Vice President nominee Kamala Harris has expressed her support for reinstating the 2021 American Rescue Plan Act's enhanced credit of up to $3,600 per child, which was effective for only one year. Politics surrounding the child tax credit have led to attacks between Harris and Vance, with Harris falsely claiming that Democrats aim to eliminate the benefit, and Democrats charging Vance for missing a vote that would have temporarily expanded the credit.
