The new plan from Joe Biden builds on what House Democrats passed back in May.
Democratic presidential nominee Joe Biden announced a proposal on Thursday that would give parents with children under the age of 17 a monthly federal payment of $250 to $300 during the pandemic.
The plan is already a part of the Heroes Act, which was passed by House Democrats in May. Biden incorporated it into his platform, and extended it as well.
Right now, families can claim a credit of up to $2,000 based on their yearly income. The Biden plan would increase that money to $3,000 for kids under 17 in 2021, and would add $600 for young children under the age of 6, bringing the total to $3,600.
Another important factor is that under Biden’s plan, the tax credit would be fully refundable. According to the Tax Policy Center, this change would concentrate the benefits of the credit on low and moderate-income families that need the funds the most.
Biden’s plan would allow families to choose monthly federal payments instead of the tax credit which comes in a lump sum once a year after taxes are filed.
According to the Biden campaign, the federal financial help would take effect at the beginning of 2021 and last through the pandemic.
“Biden’s Child Tax Credit expansion will provide thousands of dollars of tax relief for middle-class households. It will also help the most hard pressed working families avoid poverty and attain greater economic security,” the Biden campaign said in a summary of the proposal.
According to the Tax Policy Center, about 40 million families claim the existing tax credit each year, but 27 million children under 17 are excluded from the funds because their families don’t earn enough to qualify.
The Biden plan isn’t perfect, according to Ernie Tedeshi who serves as a policy economist at Evercore ISI. He explained in an interview with Business Insider that because the plan works through the tax code, the IRS will need to distribute payments to people who don’t file taxes each year because their income is too low. That means it would be possible that some people could be accidentally excluded.
Biden’s plan is in stark contrast with President Donald Trump’s vague proposal, in which he has said he wants to implement additional tax cuts if he is reelected but has not provided further details.
Much still relies on the election this November. If Democrats are able to flip the Senate blue, Biden’s plan has a good chance at being passed especially because most Democrats already back expanding the child tax credit. Advocates for the proposal say that it would have a major impact on cutting the child poverty rate in the United States.