Child Tax Credit Takes Center Stage in 2024 Presidential Election

The popular child tax credit has emerged as a major topic of contention in this year’s presidential election, with both parties attempting to outdo each other in terms of family friendliness.

Vice President Kamala Harris, the Democratic presidential nominee, prioritises increasing the child tax credit as part of her four-part program to reduce expenses for American families.

The platform also includes initiatives to make housing, groceries, and prescription prescriptions more accessible. She wants to reinstate the 2021 American Rescue Plan Act’s expanded credit of up to $3,600 per kid, which was only in place for a year, as well as establish a $6,000 credit for newborns.

Meanwhile, Ohio Sen. JD Vance, the GOP vice presidential nominee who has consistently claimed Democrats are anti-family, told CBS News earlier this month that he’d like to see the child tax credit increased to $5,000 per child, but that would depend on how “viable” that would be in Congress. Former President Donald Trump, whose daughter Ivanka advocated for expanding the credit during his first term, stated in a recent CBS News interview that he supported a big child tax credit.

“Campaigns are looking for policies that are popular and populist,” said Josh McCabe, director of social policy at the Niskanen Centre, a right-leaning think tank, stressing that raising the amount of the child tax credit is the most appealing to voters. Furthermore, unlike the child care credit, this credit is not restricted to a specific need. “With the child tax credit, families see it as being able to spend it on whatever they want.”

Vance and Democrats have spat over the credit, with Vance wrongly alleging Harris wants to abolish it and Democrats accusing him of missing a vote to temporarily broaden it.

Whoever wins the White House will have to deal with the child tax credit next year, as it is set to revert to a maximum of $1,000 in 2026, down from the current $2,000 ceiling established by the Republicans’ Tax Cuts and Jobs Act of 2017. The credit is one of several individual income tax provisions that expire at the end of next year.

Here’s all you need know about the child tax credit:

What is the Child Tax Credit?

The child tax credit, which about 46 million families will use in 2022, was adopted by a Republican-controlled Congress and signed into law by then-President Bill Clinton, a Democrat, in 1997. Margot Crandall-Hollick, a lead research associate at the independent Tax Policy Centre, described it as a relatively modest tax benefit for middle-income families intended to help alleviate the financial strain of having children.

“The child tax credit appeals to families, and as a result, it appeals to politicians,” she added, stressing that nearly 90% of families with children will receive it in 2022.

Originally, the credit of up to $500 per kid was nonrefundable, which meant that parents had to earn enough to pay federal income taxes to qualify for it. However, it began to phase out for single taxpayers with incomes of more than $75,000 and married couples earning more than $110,000.

Since then, the credit has been enhanced in a variety of ways, including an increase to as much as $2,000. Furthermore, it is now partially refundable, allowing lower-income families to get at least a portion of the credit if they earn at least $2,500, even if they do not pay federal income tax. And more higher-income households are eligible now that the benefit is being phased out for single parents with earnings of $200,000 and married couples earning twice that much.

However, if Congress does not act, the $1,000 maximum credit and lower phase-out levels will be reinstated in 2026. Furthermore, low-income families would need to earn at least $3,000 to qualify.

What the candidates intend to do

By returning the American Rescue Plan enhancement, Harris would significantly raise the size of the child tax credit while also making it fully refundable for millions more low-income families.

The Covid-19 pandemic relief bill increased payments for lower- and middle-income families in 2021 to up to $3,600 per kid up to age 6, and a maximum of $3,000 per child aged 6-17. Furthermore, for the first time, half of the credit was paid in monthly installments from July to December of that year to assist families in meeting their expenses, with the remaining half available for parents to claim when they filed their 2021 taxes.

The upgrade reduced child poverty rates by nearly half in 2021, moving 2.1 million children out of poverty, according to the US Census Bureau. However, the rate recovered to pre-pandemic levels the following year.

Harris would also include a $6,000 credit for children in their first year of life to aid with expenses like car seats and nappies. She hasn’t indicated the income requirement for this credit.

“There’s one more way I’ll help families deal with rising costs, and that’s by letting you keep more of your hard-earned money,” Harris said in a recent speech introducing her economic program, which her team claims will bring tax relief to more than 100 million Americans.

Vance stated on CBS News’ “Face the Nation with Margaret Brennan” that the $5,000 credit should be widely available, but has not provided any specific information on expanding it.

“I don’t think that you want this massive cutoff for lower-income families, which you have right now,” he told me. “You do not want a different approach for upper-income households. “You just want a pro-family child tax credit.”

When asked in a separate CBS News interview whether he supports expanding the credit to $5,000, as his running mate has suggested, the former president said he is in favour of “doing the maximum,” but that it must be discussed by Congress.

The expense of increasing credit has been a source of contention among lawmakers, especially as the country’s debt continues to rise. According to Marc Goldwein, senior policy director for the Committee for a Responsible Federal Budget, Harris’ proposal could increase federal deficits by about $1.2 trillion over the next decade, while Vance’s proposal could cost between $2 trillion and $3 trillion. Goldwein cautioned that the estimates could change if the candidates release more information about their proposals.

Efforts by President Joe Biden and congressional Democrats to extend or scale back the 2021 extension were failed. Earlier this month, Senate Republicans rejected a package that would have increased credit for low-income families and restored business tax incentives. Earlier this year, the legislation passed the House with bipartisan support.

Source: CNN