The Covid Economy

The expanded $3,000 child tax credit would help 10 million kids living in poverty. Democrats aim to make it a permanent increase

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Democrats' plan to increase the child tax credit to $3,000 per school-aged child in the upcoming $1.9 trillion Covid-19 relief package would lift nearly 10 million children above or closer to the poverty line, according to the Center on Budget and Policy Priorities.

While the legislation only calls for a temporary, year-long increase, several Democratic senators said Wednesday they're not going to let these new enhancements expire if they can help it. 

The $1.9 trillion American Rescue Plan Act, which passed the House on Saturday, increases the child tax credit to $3,000 per child ages 6 to 17 and $3,600 annually for children under 6 for the tax year 2021. The enhanced payments, which specifically cover teens who are 17 for the first time, would start to phase out for individuals earning more than $75,000 a year or $150,000 for those married filing jointly. 

The Covid-19 relief package would increase the current child tax credit amount by $1,000 ($1,600 for those with children under 6) and allow taxpayers to receive the full amount as a refund for 2021. Currently, only about $1,400 of the child tax credit is refundable. 

With those changes in place, approximately 4.1 million children under 18 would be directly affected and lifted out of poverty and another 5.75 million children would move closer to the poverty line, according to calculations from the CBPP. The expansion of the credit would essentially cut the child poverty rate in half in the U.S.

Overall, about 27 million children, whether they're currently living in poverty or not, would benefit in some way from making the credit fully refundable.

"This would have the greatest permanent cut of child poverty in the history of the United States of America. But at least for now, we have won it for one year should we get this [legislation] passed," Sen. Cory Booker, D-N.J., said Wednesday. 

This would have the greatest permanent cut of child poverty in the history of the United States of America.
Sen. Cory Booker, D-N.J.

Sens. Sherrod Brown, D-Ohio, and Michael Bennett, D-Colo., vowed to push the Senate to make the increased child tax credit permanent. "I believe that there is going to be broad support for it and we'll have to find a way," Bennett said. 

"I can't imagine any Democratic senator wants to see the poverty rate doubled in this country among children," Brown said. Still, he signaled that the fight to make these changes to the child tax credit permanent may come outside of the American Rescue Plan. One avenue to address it may be by closing tax loopholes for the wealthy, he added.

"The day Joe Biden signs this, we begin the campaign to make it permanent," Brown said. "We're going to find a way."

The current child tax credit provides $2,000 per child for children under 17. The credit is income-based, so those making over $200,000 ($400,000 for married couples filing jointly) see the amount of their credit gradually phased out. If taxpayers' credit exceeds their taxes owed, they can get up to $1,400 as a refund.

In addition to increasing the amount of the credit, the American Rescue Plan would make the credit payable in periodic installments of $250 and $300, respectively, rather than just once a year. Families who are ineligible for the new $3,000 credit due to higher adjusted gross incomes would still be able to claim the $2,000 per child credit

"There's nothing more important this Congress can do than cut the child poverty rate in half," Sen. Brown said Wednesday. 

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