Joe Biden’s anti-poverty plan to expand the child tax credit suggests that his potential presidency would likely mean a White House more focused on progressive economic policies than those seen during the Obama and Clinton years.
Aimed at reducing childhood poverty rates, Biden’s proposed expansion would be dramatic and open the allowance to families who would otherwise fail to qualify. It would increase a family’s annual, per-child credit to $3,000 from $2,000 and would be awarded in installments each month instead of the current springtime lump sum. Children under age 6 would be credited $3,600.
“You saw in 2009, the Obama-Biden administration did an expansion of the child tax credit then, and it was an important expansion,” said Seth Hanlon, special assistant for economic policy to then-President Barack Obama. “But it was more incremental, whereas this is more transformative.”
The prospective tax credit overhaul, included in a broader Biden campaign tax plan released on Sept. 17, comes as millions of Americans struggle to find employment or keep their small businesses afloat due to the Covid-19 pandemic. Though jobless figures slowly improved throughout the summer, economists say it could take years for the unemployment rate to drop from its current 8.4% back to pre-coronavirus levels, especially as jobless claims continue to exceed expectations into the fall.
The economic hardship has not been evenly distributed. Low-income workers have suffered some of the worst employment losses that threaten to exacerbate poverty for those already most at risk.
Between January and July, employment rates among U.S. workers in the bottom wage quartile (those who make less than $27,000) decreased by 16.1% compared with more modest declines of 5.3% for middle-wage workers ($27,000 – $60,000) and 1.6% for high-wage workers (greater than $60,000), according to tracktherecovery.org.
To be sure, President Donald Trump’s Tax Cuts and Jobs Act did accomplish something similar in bumping the child tax credit from $1,000 to $2,000 and reducing the income threshold for claiming it to $2,500. The law is perhaps best known on Wall Street for reducing the corporate tax rate from 35% to 21% and capping the state and local tax deduction at $10,000.
Neither the Biden nor Trump campaigns responded to CNBC’s request for comment by the time this article published.
Progressive proponents of Biden’s plan say its most exciting change is extension of the credit to families making less than $2,500 per year. Under current law, households must earn at least $2,500 per year to qualify for the credit since those making less don’t have tax liability.
That would mean an American parent without taxable income — including those who lost their job as a result of the pandemic — would nonetheless qualify for the credit.