- Joe Biden on Thursday rolled out a tax proposal to temporarily expand the child tax credit to better benefit families during the pandemic — and allow people to opt for monthly federal payments.
- It would bump the annual tax credit to $3,000 for children under 17, plus an additional $600 for children under 6.
- Ernie Tedeschi, a policy economist at Evercore ISI, said the monthly-payment element could strengthen families' budgets, comparing it to a stimulus check of $250 to $300 a month.
Joe Biden, the Democratic presidential nominee, on Thursday rolled out a proposal to allow families with children to receive a monthly federal payment of $250 to $300 during the pandemic.
The plan is a temporary expansion of the existing child tax credit, which shrinks the tax bill of families raising kids. House Democrats approved the measure in May through the Heroes Act, and Biden incorporated it into his economic platform.
An analysis from the Joint Committee on Taxation, a nonpartisan congressional body, found that it would carry a $109 billion price tag.
Now, people can claim a credit of up to $2,000 based on their annual income — an amount that was doubled under the 2017 Republican tax law. Biden's plan increases that to $3,000 for kids under 17 in 2021 and adds $600 for young children age 6 and below, totaling $3,600.
It allows people to opt for monthly federal payments, a contrast to the annual relief that comes only after people file taxes.
"Biden's CTC expansion will provide thousands of dollars of tax relief for middle-class households," a page about the plan on Biden's website said. "It will also help the most-hard pressed working families avoid poverty and attain greater economic security."
It would take effect in 2021 and last "as long as economic conditions require," it said.
The Tax Policy Center estimated that 90% of families with children would receive an average of $2,380 from the credit this year. About 40 million families claim it every year.
But 27 million children under age 17 are excluded from the benefit since their families don't earn enough to qualify, according to the organization.
Ernie Tedeschi, a policy economist at Evercore ISI, said Biden's proposal would make the tax credit fully refundable, comparing it to "the equivalent of sending people checks."
"Once you make it refundable, it's no longer dependent on what your tax bill is to the federal government," Tedeschi told Business Insider. "You get it regardless of the tax you owe."
He added that the monthly-payment element could strengthen families' budgets, comparing it to a stimulus check of $250 to $300 a month.
"That's important because when you are talking about lower-income families, you have these expenses every month," Tedeschi said. "The need for diapers doesn't wait until April."
Seth Hanlon, a tax expert and senior fellow at the left-leaning Center for American Progress, said the proposal would benefit lower-income people who don't reap as much of the benefits as middle-class families.
"The more dramatic impact is it reaches families that get much less than the full amount, those getting little or nothing from the tax credit now," Hanlon told Business Insider.
Biden's plan has some drawbacks, though. Tedeschi said that working through the tax code requires preparing the IRS to distribute payments to people who don't file every year since their income is too low and that some could be left out as a result.
The Biden campaign is seeking to contrast its tax plan with President Donald Trump's sparsely detailed proposal. Trump has said he wants to provide additional tax cuts in a second term, without elaborating further.
If Democrats recapture the Senate from the GOP, Biden's proposal could become a reality. Most Democrats already back dramatically expanding the child tax credit, and its advocates say it would cut the child poverty rate by a substantial amount.
The child-tax-credit expansion that the House approved strongly resembles the American Family Act introduced by Sens. Michael Bennet and Sherrod Brown last year. The Center on Poverty and Social Policy at Columbia University found that the legislation could lift over 4 million children out of poverty.