The expanded child tax credit had a significant positive impact on families with children, but it expired in 2021. Since then, several lawmakers have made efforts to revive this credit but with little success. A group of U.S. Representatives has reintroduced the American Family Act to make the expanded monthly child tax credit permanent.
What’s The Need For An Expanded Monthly Child Tax Credit?
In 2021, the American Rescue Plan Act expanded the child tax credit, and changed how the credit was distributed. At the time, half the credit amount was distributed through six monthly installments, while the other half was available when filing the 2021 tax return during the 2022 tax filing season.
Moreover, the American Rescue Plan Act increased the credit from $2,000 to $3,600 for children ages five and under, and $3,000 for children ages six through 17. Also, the child tax credit was made fully refundable to qualifying taxpayers.
It is estimated that the child tax credit reached more than 61 million children. A 2022 paper from the American Medical Association noted that the expanded child tax credit helped to boost child wellness and the ability to pay household expenses, as well as decreased childhood food insufficiency.
However, the research paper also noted that the benefits of the expanded child tax credit “diminished immediately” when the credit reverted to pre-pandemic levels at the end of 2021.
In 2022, the child tax credit reverted to the pre-pandemic level, i.e., up to $2,000 per qualifying child under the age of 17. This credit is smaller and excludes children who are 17 years old.
Thus, U.S. Representatives Rosa DeLauro (D-CT), Suzan DelBene (D-WA), and Ritchie Torres (D-NY) want the expanded credit to be restored, as well as make it permanent. For this, they reintroduced the American Family Act.
American Family Act: How It Could Help
Backed by 204 House Democrats, the American Family Act would restore the $300 expanded monthly child tax credit for children aged six and younger and $250 per month for children ages six through 17.
Further, the bill would also provide the expanded monthly child tax credit to “left-behind” children by eliminating the rule that limits the refundable portion to $1,400 per year. Also, the bill eliminates the earnings requirement that previously prevented about one-third of eligible children from the full credit.
“Making the Child Tax Credit permanent provides much-needed financial stability for working families, helps them make ends meet and fight rising costs, and reduces child poverty,” Representative Torres said.
Several organizations have come out in support of the expanded monthly child tax credit, including the Institute on Taxation and Economic Policy (ITEP) and the Food Research & Action Center (FRAC).
ITEP previously noted that the percentage of children living in poverty would have dropped only slightly from 2020 to 2021, (16% to 15.3%) in the absence of tax credits and other federal programs.
“We know the CTC works wonders to boost economic security; when the expanded credit was in place in 2021 child poverty was cut by an astonishing 46 percent,” Amy Hanauer, Executive Director of ITEP, said.
