Democrats are pushing to renew the expanded child tax credit. Here’s why that hasn’t happened yet

Personal Finance

Parents and children participate in a demonstration organized by the ParentsTogether Foundation in support of the child tax credit portion of the Build Back Better bill outside of the U.S. Capitol on Dec. 13, 2021.
Sarah Silbiger | Bloomberg | Getty Images

Sen. Bernie Sanders, I-Vt., took to the Senate floor Wednesday to decry the Senate’s “strange priorities.”

The chamber had passed what he called a “$53 billion blank check” to aid the microchip industry, but has neglected other initiatives that would help individual Americans, he said.

On the top of his list: renewing the expanded child tax credit, which expired in December.

Sanders joins a growing list of of Democratic or affiliated legislators calling for reupping the credit, which was included in the party’s large Build Back Better legislation they had hoped to pass this year. That legislation has since stalled.

The child tax credit was temporarily expanded for 2021 under the American Rescue Plan Act passed by Congress in March 2021. The legislation made the existing $2,000 credit per child more generous, with up to $3,600 per child under age 6 and $3,000 per child ages 6 through 17.

About half of those sums were deployed through monthly checks that started in July and ended in December. That included $300 per month for children under 6 and $250 per month for children ages 6 through 17. The remaining child tax credit money was paid to families when they filed their tax returns this year.

Parents who fell under certain income thresholds received full payments. That included married couples with less than $150,000 in income and heads of household with under $112,500.

The legislation also made the credit fully refundable to families with little or no income.

Estimates show those changes helped reduce child poverty by more than 40%, according to the Center on Budget and Policy Priorities.

Democrats as well as Sanders have pushed for keeping the more generous child tax credit at the top of their to-do list.

“We’re still working on it,” Sen. Sherrod Brown, D-Ohio, told CNBC.com in an interview this week.

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“I have not done anything that got the response at home and around the country that that did,” he said.

Former Treasury Secretaries Robert Rubin and Jacob Lew, who served under Democratic Presidents Bill Clinton and Barack Obama, respectively, this week penned a New York Times op-ed calling for making the child tax credit permanently available to families with little to no income.

If the current $2,000 per child tax credit were made fully refundable, it could reduce child poverty by 20%, they estimated.

“Refundability is the most consequential way to reduce child poverty, and we urge lawmakers to make it permanent,” Rubin and Lew wrote.

Yet not all leaders agree. Sen. Joe Manchin, D-W.V., has said he would not support renewing the child tax credit without including work requirements.

However, a recent report published by researchers at Columbia University found small and statistically insignificant effects of the child tax credit on employment and labor force participation.

Data shows the monthly child tax credit payments helped families pay for food, electrical bills and prevent their children from going to bed hungry, said Chuck Marr, vice president for federal tax policy at the Center on Budget and Policy Priorities.

“Then the rug got pulled out right from underneath them, just as food prices and energy prices started to surge,” Marr said.

“Some have used inflation as an excuse not to do something, when really, for low-income people, it’s another reason to do it,” he said.

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