More than a million children in Colorado and millions more across the nation will begin receiving $250 to $300 a month from the IRS on Thursday under Sen. Michael Bennet’s ambitious plan to cut child poverty in half with an amped-up child tax credit.
Unfortunately, the families most in need of this money – the very poorest in America – won’t get the money unless they inform the IRS of their eligibility by logging into a portal and providing their kids’ social security numbers and their own income information.
We wish the opposite were true, but because those couples filing tax returns together making less than about $24,000 don’t have to file tax forms, they will have to be proactive to get the enhanced child tax credit. Everyone who filed tax documents in 2020 will automatically get the money, and most will have the cash magically appear in their IRS-linked bank accounts.
The beauty of Bennet’s enhanced child tax credit is the potential it has to help those in poverty. It’d be a shame if they missed out, so we are trying to get the word out. The IRS has launched a website to help make sure everyone who is eligible gets their money, and those who don’t want to get the money opt-out.
Bennet’s dream – only temporary now as part of the American Rescue Plan – is to make the increased child tax credit a permanent feature of the U.S. tax code giving parents with young children resources for child care, housing, food and, well, anything. It’s a plan we support.
Tax breaks for parents have long been a part of the U.S. tax code.
President Donald Trump included $2,000 annual child tax credits in his 2017 Tax Cuts and Jobs Act, however, that credit was non-refundable, meaning it primarily benefited middle-class and upper-middle-class families. In fact, the income threshold under that law to get the tax credit was an incredible $400,000 of taxable income for a family married filing jointly. But those families that made so little they weren’t paying enough taxes to be refunded received no benefit from it, or only a partial benefit up to the amount of tax liability they had at the end of the year.
We think a tax policy to help children should be focused at the lower ends of the income threshold, not at the upper ends, and that it should include a good swath of middle-income Americans who also are struggling with huge student loans, unprecedented housing costs, health insurance gouging, and exorbitant child care costs.
Bennet’s proposal, which is getting a trial run this year as part of President Joe Biden’s stimulus plan, will increase the Trump tax credit to $3,000 for children between 6 and 17, and $3,600 for younger children. More importantly, it makes the tax credit fully refundable; meaning families that make too little to pay taxes will receive the full tax credit. Bennet’s plan also makes the tax credit paid out on a monthly basis instead of at the end of the year.
It’s a novel, thoughtful approach to the needs of lower-income American families. Wisely, Bennet’s plan lowers the income threshold for the increased pavements to a much more reasonable level – a married couple filing their taxes jointly with a taxable income of $150,000 a year. Those making more than that, but less than $400,000, will still receive the $2,000 tax credit.
Bennet’s team expects the monthly payments to roll out smoothly. The website above also includes places for folks to change their status or update their bank account information.
Fraud, like the organized crime that has plagued the increased unemployment benefits, is unlikely, given that the IRS requires social security codes for children and generally has records making it easier to verify how many children someone claims and their taxable income reported through employers.
For the child tax credit to be as successful as Bennet and others hope — including Republicans who put a scaled-back version of it in the 2017 tax reform — lower-income Americans have to be able to access it. We hope resources will be poured into making sure those most in need get their tax credits too.
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