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Senior Democrats on Monday will unveil legislation to provide $3,000 per child to tens of millions of American families, aiming to make a major dent in child poverty as part of President Biden’s $1.9 trillion economic relief package.

The 22-page bill to dramatically expand direct cash benefits to American families was obtained by The Washington Post ahead of its release.

Under the proposal, the Internal Revenue Service would provide $3,600 over the course of the year per child under the age of 6, as well as $3,000 per child of ages 6 to 17. The size of the benefit would diminish for Americans earning more than $75,000 per year, as well as for couples jointly earning more than $150,000 per year. The payments would be sent monthly beginning in July, a delay intended to give the IRS time to prepare for the massive new initiative.

The bill, spearheaded by Rep. Richard E. Neal (D-Mass.), chair of the House Ways and Means Committee, emerges as congressional Democrats <a href="https://www.washingtonpost.com/us-policy/2021/02/05/house-biden-stimulus-harris-tiebreaker/" target=_blank>accelerate their plans</a> to enact Biden’s stimulus plan within weeks. It also comes days after Sen. Mitt Romney (R-Utah) <a href="https://www.washingtonpost.com/us-policy/2021/02/04/romney-child-benefit-stimulus/" target=_blank>surprised policymakers</a> with a proposal to send even more in direct cash per child to American families, lending bipartisan support to the major push for child benefits.

Biden sharpens attack over GOP stimulus approach as Democrats advance plan in Congress

Biden’s proposed child benefit has quickly emerged as a potentially defining feature of his administration’s economic agenda — one that could make a lasting imprint on American welfare policy. Its execution could also prove crucial to deciding Democrats’ ability to maintain control of Congress, given its likely direct impact on the lives of tens of millions of voters.

Joy Sung

Despite Romney’s support, several Republican lawmakers and conservative scholars have started criticizing similar measures because they would give government aid both to working and nonworking Americans alike. That has set the stage for a major political clash over the new benefits.

Biden’s plan has been estimated to cost upward of $120 billion per year, which would add to the national deficit as part of the Democrats’ broader package.

“The pandemic is driving families deeper and deeper into poverty, and it’s devastating. … This money is going to be the difference in a roof over someone’s head or food on their table,” Neal said in a statement. “This is how the tax code is supposed to work for those who need it most.”

America <a href="https://www.oecd.org/els/CO_2_2_Child_Poverty.pdf" target=_blank>has one of the highest rates</a> of child poverty in the developed world, according to the Organization for Economic Cooperation and Development, in part because <a href="https://www.washingtonpost.com/news/wonk/wp/2018/05/16/the-u-s-spends-less-on-children-than-almost-any-other-developed-nation/" target=_blank>it spends less on child benefits</a> than almost any other. Neal’s plan would only create the new benefit for one year, but congressional Democrats and White House officials have said they would push for the policy to be made permanent later in the year.

Biden is open to mandating paid family leave in future legislation, Yellen says

White House officials and Senate Democrats have reviewed Neal’s legislation and are supportive of the proposal. Aides cautioned some of its details may change between now and final passage of the legislation. It is also unclear whether Democrats can pass the new child benefit through the Senate under the rules of reconciliation, the parliamentary procedure they are using to pass Biden’s stimulus without Republican votes.<b> </b>House Speaker Nancy Pelosi (D-Calif.) has said she is aiming to pass Biden’s relief package, which would include the child benefit, through the House within two weeks.

An analysis by Columbia University researchers of Biden’s proposal found it would cut the number of children in poverty by as much as 54 percent, the equivalent of 5 million children. More than 1 million Black children would be lifted out of poverty by the plan, the researchers found.

“Of all the policy issues being discussed this Congress, of all the things we are working on, the biggest impact we can make for economic justice in our country — and enact measurable transformational change — lies within this policy that would slash child poverty,” said Sen. Cory Booker (D-N.J.), who has been involved in similar efforts in the Senate, in an interview.

Catch up on the most important developments in the pandemic with our coronavirus newsletter. All stories in it are free to access.

The White House called generally for an expansion of the Child Tax Credit in its initial stimulus proposal, largely leaving how to do so to congressional Democrats.

Neal’s office has filled in those details. Under his bill, the IRS would base eligibility for the payments on families’ prior-year income, which is also similar to how it sent out stimulus payments last year. The legislation would create an online portal, managed by the Treasury Department, for families to update their information if their annual incomes decline and they became eligible for the payment as a result.

The IRS would begin sending out payments July 1 in a similar fashion to how it sent out the stimulus payments, directly depositing the payments in taxpayers’ bank accounts. Crucially, the benefits would not be deducted off taxpayers’ existing tax liability, meaning American parents would still receive $250 per month per child — or $300 per month per young children — even if they have an existing tax obligation with the IRS.

The benefits will also be delivered monthly in an attempt to help poorer parents facing fluctuations of income. That may be difficult for the IRS to achieve. Treasury officials have told Democratic lawmakers that they would do their best to implement the program. But concerns remain about the capacity of the tax agency to stand up the benefit during a pandemic and a filing season that has already stretched the IRS thin.

Congress has also substantially cut IRS funding during the past decade, largely due to Republican efforts to curb its influence. The Democratic plan calls for substantially increasing funding for the IRS to implement the plan, although the precise amount remains unclear. It also says Treasury Secretary Janet Yellen can adjust the monthly payment structure if she decides it is “not administratively feasible” and instead deliver the payments at the “shortest interval” that is.

Neal’s plan also creates a “safe harbor” provision for parents who are mistakenly sent the benefit. Many parents who are caring for a child one year may not the next, but because eligibility is based on prior-year income the IRS may still send them a check anyway. The “safe harbor” provision aims to prevent parents of poorer and moderate incomes from being saddled with a surprise bill at tax time because the IRS incorrectly assumed they were owed the child benefit, excluding them from requirements to pay the bill back at the end of the year.

The Neal plan represents an expansion of an existing $2,000 Child Tax Credit under current law, both through extending it to low-income families and by making it more generous. Under Neal’s plan, the current phaseout parameters for this existing $2,000 would be the same as they are currently. Lowering the income requirement for that $2,000 would reduce its value for more affluent families, and violate Biden’s pledge not to raise taxes on families with below $400,000 in annual income.

Some policy experts say Neal’s plan could create unnecessary administrative complications for families with sharp fluctuations in income. Chye-Ching Huang, executive director of the New York University Tax Law Center, said on Twitter that numerous countries with similar child benefit programs have “caused massive hardship (&amp; political firestorm)” by creating surprise end-of-year bills for families who were incorrectly disbursed the payment over the year.

She cited the case of Australia, where, in 2015, about 350,000 families were overpaid benefits and faced aggressive debt-collection tactics.

“The basic point is that you want to do everything possible to avoid creating this type of hardship for families. Safe harbors should be very robust,” she wrote on Twitter.

Romney’s proposed expansion of child benefits would have sent payments to every American, regardless of their income, through the Social Security Administration. Under Romney’s plan, child benefits that went to affluent households would then be clawed back at tax filing time by the IRS.

By instead tethering the benefit payments to annual income, Democrats risk creating an administrative headache for both the IRS and taxpayers, said Sam Hammond, a policy expert at the right-leaning Niskanen Center who helped craft Romney’s plan. The diminishing size of the benefit may mean the IRS would deposit checks worth as little as $10 in the bank accounts of more affluent Americans.

The U.S. spends less on children than almost any other developed nation

Romney’s plan included the elimination of an existing federal welfare program and cuts to food stamp benefits, which Neal’s proposal would not.

“There is something symbolically important about this being a universal child benefit,” Hammond said. “Overall, Neal’s plan would be, unequivocally, a massive win against child poverty. But it could do more to clean up the administrative complexity of the current system by making the payment universal.”

Booker said he supported the push to making the program more universal but resisted the idea of endorsing a plan that would send benefits to affluent Americans.

Matt Bruenig, founder of the left-leaning think tank People’s Policy Project, warned that tying the benefit to prior-year status would mean some families receive too much or too little money if they have changes in their number of children, custody, or marital status.

“Since these things cannot be known in advance, the IRS is being instructed to assume each family’s situation is exactly the same as it was the last time they filed taxes,” Bruenig said. “Many families whose circumstances change will end up receiving lower monthly payments than they are eligible for — or find themselves with a massive surprise tax bill at the end of the year.”

Under Neal’s plan, the rules for immigrant children are the same as under existing law, meaning a child needs to have a Social Security Number for the family to receive the benefit but the parents do not. About 4 million tax returns were <a href="https://prospect.org/power/denying-child-tax-credit-undocumented-children/" target="_blank">filed </a>by those without a Social Security Number before Republicans restricted eligibility in their 2017 tax law.

On the right, conservatives have begun increasingly arguing that the expansion of child benefits represents a dangerous expansion in the country’s welfare programs. Scott Winship, director of poverty studies at the right-leaning American Enterprise Institute, maintains that Romney’s plan would discourage poor Americans from working by giving them government subsidies.

“We know that the negative income tax experiments of the 1970s found that on net, greater benefits led to a sizable decline in employment among single mothers, and research on the state and federal welfare reforms of the 1990s found that, on net, less generous benefits led to more work in the population affected,” Winship said in an email Sunday. “My concern is that the Romney proposal’s incentives for some low-income parents to work more would be weaker than the incentives for some to work less—both because the child allowance benefits can replace earnings foregone but also because the Earned Income Tax Credit that would be available to many single parents under the proposal would be less generous than it is now.”

Sens. Sherrod Brown (D-Ohio) and Michael F. Bennet (D-Colo.) have been involved in crafting similar legislation in the Senate, as have Reps. Rosa L. DeLauro (D-Conn.) and Suzan DelBene (D-Wash.) in the House. The White House says Neal’s plan is consistent with the provisions of Biden’s stimulus proposal.

“The President has made it a central priority of his first legislative proposal to cut child poverty in half this year through a child tax credit expansion in the American Rescue Plan, and looks forward to working with members of Congress on this legislation,” a White House spokeswoman said in a statement.

New York State Associated Press Young Journalist of the Year

Cornell University, BA in history

Jeff Stein is the White House economics reporter for The Washington Post. He was a crime reporter for the Syracuse Post-Standard and, in 2014, founded the local news nonprofit the Ithaca Voice in Upstate New York. He was also a reporter for Vox.

Jeff Stein

washpost

$3,000-per-child benefit: Senior Democrats prepare plan for Biden stimulus

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