Financing

Analysis: The child tax credit is the most important thing since Social Security. For one year only.

With Social Security, the government is making sure older Americans don’t fall into poverty. With Medicare, he makes sure they have health insurance. With the Affordable Care Act, it helps other people who need it to buy health insurance.

Now he’s trying to make sure American kids have money every month. This is a very big deal. But that’s a year-long experiment for now, unless Democrats can find a way to force the Senate again and make the vastly expanded credit permanent.

Most parents are eligible. Unlike food stamps – now called the Nutrition Assistance Parogram Supplement, or SNAP, benefits – or other social assistance programs aimed only at the poor, this new credit is much larger.

More than just parents in need, up to $ 300 per child was deposited into their bank accounts on Thursday. This program, an enhancement of an existing tax credit, will help the middle class and even people earn hundreds of thousands of dollars.

Interactive calculator: How Much Control Should Parents Expect?

Part of the tax credit will be claimed next year at tax time, but the big change is that part of the benefit goes directly to parents in advance, providing a monthly boost.

The IRS has desperately tried to reach low-income Americans – through churches and other community groups – who may not have needed to file taxes, but now should. , as that will qualify them for that credit. Otherwise, up to 5 million children could be missing, according to a CNN report.

The United States has been moving towards these kinds of benefits gradually for years, in increments and on a bipartisan basis, but not in a bipartisan fashion.

Republicans doubled the child tax credit to $ 2,000 per child with their huge tax cut bill in 2017, but they rejected this new expansion, which Democrats incorporated into the bill. Covid assistance that they adopted in 2021.

But the idea of ​​giving money every month to American parents (not unheard of in such wealthy European countries) clearly has some bipartisan support and could help keep American children out of poverty and improve the quality of life for parents.
It shares some similarities with a proposal made earlier this year by Republican Senator Mitt Romney of Utah (also, no doubt, Obamacare’s godfather, the other great achievement of democratic social spending in recent years). Democrats rejected his plan because it was funded by cuts to other programs they love. Democrats were able to pass this year-long experiment into law in part because they didn’t have to find cuts to pass the Covid relief plan.

Now Democrats are calling for this to be cemented into US law.

“Let us mark this day, Thursday, July 15, 2021, as the day the American family has become so much stronger,” Vice President Kamala Harris said during remarks with President Joe Biden in Washington. “It’s a good day, America.”

She was happy to have insisted that the loan be paid monthly, which helps the poorest parents to cover their expenses throughout the year. She also argued that the benefit will help children once they get older, improving their health and quality of life now.

“Payments can be monthly, but the impact of this child tax credit will undoubtedly be generational,” she said.

A Brooking review of research on similar programs on a smaller scale argued that the benefits of these payments follow children into adulthood. He also cites that researchers at the Columbia Center for Poverty and Social Policy argued that the checks would help reduce poverty, especially among black, Hispanic and Native American children.

Is it a tax credit or a social assistance program?

Democrats are careful to label those payments a “tax cut,” as Harris did on Thursday. Republicans, like Sen. Marco Rubio of Florida, call it “welfare.” I asked CNN’s Tami Luhby, who covers health care and public assistance programs, her opinion on this point:

LUHBY: Both sides have a point here. The child tax credit has been around for years and has garnered bipartisan support, notably from Rubio, who pushed to increase it as part of the GOP’s 2017 tax cuts. But that’s largely because that it was available primarily to working families – you had to have some income to claim it.

The US bailout has made a fundamental change to credit, making it fully repayable by 2021. This allows many more families – including lower-income Americans who are unemployed – to claim it. More than 26 million needy children will now be eligible for full credit thanks to this change, a key tool in Democrats’ campaign to reduce child poverty.

About 1 in 7 children were in poverty in 2019, according to the latest census data. Changes to the credit, including the increase in the amount, are expected to reduce child poverty by almost half this year.

But it has also caused an uproar among Republicans, who call it welfare.

The elimination of income requirements makes it a government assistance program, although it is also open to most middle and upper class American families. However, many advocates for the expansion of the child tax credit compare it to a child allowance or a universal basic income program that supports most families in the United States.

Learn more about Luhby’s work here.
How much is it costing taxpayers (many of whom are parents who are now receiving money!)? The cost of the permanent expansion of the tax credit would amount to nearly $ 1.6 trillion over 10 years, according to the Tax foundation, or between $ 100 billion and $ 110 billion in each of those 10 years, including 2022.

By way of comparison, the Pentagon has requested $ 715 billion for its 2022 budget. This expansion is therefore worth about one-seventh of the Pentagon’s budget in 2022.

For another comparison, the United States spends a lot more than it takes in. The budget deficit in 2021 expected to reach $ 3 trillion and by 2022, it is expected to rise to $ 1.2 trillion, several times the cost of that credit.
However, this has an implication for some families: getting the credit in early increments could have consequences if you expect a tax refund, warns the Wall Street Journal.

The first checks. If I was surprised to see a check appear in my bank account this morning from “IRS TREAS 310 CTC”, I’m sure millions of other Americans were too. There is no first check that came out, since the IRS has so much banking information from people and the agency just pressed a few buttons.

This was not the case after the signing of the Social Security Act in 1935. The first checks did not come out until 1940, after people had paid into the program for a few years. We know exactly who got the first check. It was Ida May Fuller, legal secretary in Ludlow, Vermont.

According to the Social Security Administration, she “worked for three years under the Social Security program. The taxes accrued on his salary during those three years totaled $ 24.75. Her initial monthly check was $ 22.54. During her lifetime, she received a total of $ 22,888.92 in Social Security benefits. “

Inflation! That $ 24.75 is equivalent to about $ 480.32 today, according to an inflation calculator, which is an inflation rate of 1,840.7%. A dollar went much further back then.

Random thought about government intrusion. Part of the country is extremely nervous that someone working for the government will knock on their door to encourage them to get the vaccine.

I legitimately wonder how government anti-intrusion parents will react when they see new monthly government payments appearing in their bank accounts without asking. I bet they agree more with that. We will see.


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