President Joe Biden highlighted the continuation of the expanded child tax credit in his recent State of the Union address.
Biden urged Congress to revive the expanded child tax credit implemented from the American Rescue Plan at the height of the pandemic.
He stated that the expanded child tax credit is another way the government can support families across America.
Expanded Child Tax: Biden's State of the Union Address
As reported by Reuters, at the State of the Union address, Biden mentioned his desire to reform current tax laws in the country. The President even mentioned imposing a billionaire minimum tax.
He focused on addressing the current economic problems and discussed the critical issues affecting his constituents.
Above all, the expanded child tax credit is one that every American family, particularly those with low-income households or those living below the poverty line, can benefit from the most.
The expanded Child Tax Credit (CTC) was instituted as part of the American Rescue Plan in 2021 in response to the COVID-19 pandemic. The goal of the expanded CTC was to provide financial relief to families with children struggling during the pandemic.
The American Rescue Plan increased the amount of the CTC and made it fully refundable, meaning that even families who do not owe federal income tax can receive the full amount of the credit.
In 2021, the maximum benefit of the credit was raised from $2,000 to $3,000 for children aged 6 to 17 and to $3,600 for children under the age of 6.
According to Fortune, as the vaccines became more available and a new normal ushered in, Congress failed to renew the expansion in 2022, reverting the credit to its former, less generous iteration.
It is possible that this year, when families file their tax returns for 2022, they will receive a smaller tax refund because of this factor. The previous year saw several states implement customized CTC versions to compensate for some of the gaps.
Nonetheless, without the federal expansion, millions of children will fall back into poverty in January 2022.
How the expanded Child Tax Credit can impact American households
Although it can take years for a policy to have tangible effects, the expansion of the CTC had an impact that was felt immediately and pronounced.
According to the Center on Budget and Policy Priorities, the expansion that is being proposed would make it possible for 27 million children, including approximately half of all Black and Latino children, to qualify for the full child tax credit. Currently, these children's families do not receive full credit because their parents are not earning enough money to qualify.
This plan would bring 9.9 million children over or closer to the poverty line, including 2.3 million black children, 441,000 Asian American children, and 4.1 million Latino children. It would also reduce the number of children living in extreme poverty by 1.2 million.
In addition, it would pull 1.1 million children out of severe poverty by lifting their families' after-tax incomes to levels at least 50% higher than the poverty line.
This is a significant accomplishment, as child poverty has long-lasting impacts on children's health, education, and future opportunities.
The expanded CTC has also positively impacted the economy by putting money into the hands of families who are likely to spend it quickly. This, in turn, has helped to boost economic activity and stimulate job growth.
Overall, the expanded CTC has been a valuable tool in providing economic relief to families during difficult times and reducing child poverty.
If Congress follows through with Biden's request, the positive economic relief that the expanded child tax credit can give will likely continue to be felt for years to come.
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