Democratic Sen. Ron Wyden and Republican Rep. Jason Smith revealed a new bipartisan tax framework on Tuesday.
The proposal aims to augment the popular Child Tax Credit, enhancing its impact on low-income families and making adjustments for inflation.
The comprehensive proposal not only increases the refundable portion of the credit but also ensures that low-income families with multiple children receive a more substantial benefit.
The plan addresses inflation concerns and endeavors to provide meaningful support to families amid the current political climate.
Sen. Wyden, chair of the Senate Finance Committee, emphasized the significance of the plan, stating that approximately 15 million children from low-income families would experience positive outcomes.
Against the backdrop of a challenging political environment, Wyden highlighted the importance of passing pro-family policies that contribute to the advancement of numerous children.
The tax package encompasses more than the Child Tax Credit adjustments. It introduces new low-income housing tax credits, disaster tax relief measures, and tax benefits for Taiwan.
Rep. Smith, chair of the House Ways and Means Committee, characterizes the proposal as a “common-sense tax package” designed to bolster Main Street businesses, rejuvenate communities, support American families, and enhance competitiveness with China.
However, the fate of the legislation in Congress remains uncertain, given ongoing struggles among lawmakers to reach consensus on spending measures to avert a partial government shutdown before the looming Friday deadline.
Notably absent from the announcement were Sen. Mike Crapo, the top Republican on the Senate Finance Committee, and Rep. Richard Neal, the top Democrat on the House Ways and Means Committee.
Approval for Bipartisan Child Tax Credit Boost
Sen. Wyden expressed his goal to pass the package before the commencement of the tax season on Jan. 29, underscoring the urgency of addressing crucial policy changes promptly.
The proposed changes to the federal Child Tax Credit build upon the impactful modifications implemented in 2021 under the American Rescue Plan.
Census Bureau data revealed that the expanded credit lifted 3 million children out of poverty, resulting in a record-low child poverty rate in 2021.
Despite its positive impact, the one-year expanded credit expired at the end of 2021, facing opposition from Republicans and Democratic Senator Joe Manchin. The child poverty rate subsequently doubled in 2022.
The proposed bipartisan tax framework aims to enhance the Child Tax Credit, bridging the gap left by the expiration of the 2021 policy.
While not a complete return to the previous expanded credit, lawmakers assert that the program would become more generous, especially for low-income households.
Key provisions of the framework include an increase in the maximum refundable portion of the Child Tax Credit and adjustments to ensure fair distribution to families with multiple children.
Additionally, the proposal suggests changes in the way the credit is phased in, along with adjustments for inflation starting in 2024 and flexibility for parents to use current or prior-year income for credit calculation.
The nonpartisan Center on Budget and Policy Priorities released a report supporting the changes, estimating that the proposed adjustments could lift as many as 400,000 children above the poverty line in the first year and 500,000 or more when fully implemented.
The White House has expressed support for the proposed tax deal, emphasizing President Joe Biden’s commitment to fighting for the full expanded Child Tax Credit.