Over the last few months, tax credits, student loans, and interest rates have been hot topics in economic and political circles. Moratoriums and benefits are set to expire in 2022, leaving many relief programs on the cutting room floor. One of these benefits, the child tax credit, could be in trouble. Here’s what you should know.
What Is the Child Tax Credit?
For those unfamiliar with the child tax credit, a program passed in March 2021 sends monthly checks to families with children. Families may receive $300 per child under 6 and $250 for children ages 6-17. The amount may decrease for families with higher incomes, but the tax credit applies to millions of families across the United States.
The pandemic has made economic distress worse for many families, and the child tax credit helped to alleviate some of the pressure on parents to provide. An evaluation from the White House found that this program could cut child poverty in half.
However, because of a complicated legislative proposal introduced to Congress, this program could be phased out or cut entirely.
Build Back Better
The continuation of the child tax credit depends on the passage of the Build Back Better bill, which has yet to pass through both houses of Congress. The House passed the bill in November, but it’s stalled in the Senate as representatives grapple over the details and rollout.
Like most economic plans, the tax credit is part of a larger piece of legislation that needs to pass in order to continue. Lawmakers often include benefit programs like this in legislation to improve the chances of passing it, but doing so can also complicate things when the bill goes to a committee for approval.
The child tax credit has yet to go to committee as senators have yet to approve it overall. Currently, the bill is being scrutinized by legislators and edited to become more palatable. This is how bills work, and while it may be frustrating when a piece of legislation stalls, this is the process it must go through in our government.
One of the sticking points with the child tax credit is rising inflation. Food, gas, and loan interest have been on the rise over the last year at a rate that is concerning, to say the least. A tax credit doesn’t generally affect inflation, but the concern many senators share is how the price of the program will change inflation rates over time.
Most of the time, inflation rates are adjusted by the government when necessary or monitored closely to determine whether a crisis is ahead. The national debt is already a concern, and increased spending at the federal level doesn’t help matters.
In theory, a spending plan like the child tax credit could increase inflation slightly to account for the money leaving federal coffers. Unfortunately, benefit programs come at a cost that is often shouldered by the American people eventually.
The child tax credit is a highly beneficial program for millions of families, but it could end soon. Until it passes through Congress, this program will continue to remain in limbo as legislators argue over how spending will affect inflation – a legitimate concern.
Buchalter & Pelphrey Attorneys At Law will continue to follow this story as it develops.
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