New stimulus plan proposes child benefit of up to $3,600


New stimulus plan proposes child benefit of up to $3,600

House Democrats unveiled detailed plans this week for a $1.9 trillion stimulus package with an expanded child tax credit of as much as $3,600 per child as well as a new round of $1,400-per-person payments. The enhanced child benefit would replace the current $2,000 tax credit with direct cash payments of $300 per child under six and $250 each for older kids. While the stimulus legislation released by Rep. Richard Neal (D-Mass.), chairman of the House Ways and Means Committee, provides the child benefit for only a single year, Democrats said they would seek to make it permanent. Rejecting earlier calls to lower the cap, the legislation would make the full stimulus and child benefits available to individual taxpayers with an income of $75,000 and couples who earn up to $150,000. Chuck Marr, senior director of federal tax policy at the Center on Budget and Policy Priorities, a think tank, said a permanent child benefit would cut the number of children living in poverty by 4.1 million and would have “real meaning to low- and middle-income families.”

The Democratic plan follows some of the contours of a proposal put forward last week by Sen. Mitt Romney (R-Utah). Under the Romney plan, parents would get $1,400 right before the birth of a child and then receive $350 a month for each child under the age of five and $250 per month for each child aged 6 to 17. The $250 billion cost of the annual payments would be offset by abolishing the state and local tax deduction (SALT), tax credits for day-care costs, the head of household filing status, and the Temporary Assistance for Needy Families welfare program.

The House Democrats’ child tax credit plan includes the laudable provision of extending it to nonworking parents, said Matt Bruenig in The New York Times. It was always “morally wrong” to tie social benefits to work when it’s the unemployed who are “struggling the most.” Unfortunately, Democrats didn’t go as far with the earned income tax credit, which was only increased from $543 to $1,500 for childless adults. In that case, families with children must still earn almost $15,000 to qualify. “Why fix one credit but leave the other broken?”

The Romney plan from which Democrats drew is even more “wildly ambitious,” said Ramesh Ponnuru in It would confront America’s historically low birth rate by making it “easier for people to start and expand their families,” and cut child poverty by one-third. But progressives don’t want to see the end of TANF, and conservatives are raising claims that it would disincentivize work.

The stimulus plan from Biden and Democratic lawmakers carries “some big risks,” said Lawrence Summers in The Washington Post. Conditions are already ripe for inflation, with rising employment, record savings levels, and low interest rates. If we inject an unprecedented $1.9 trillion into the economy, it could unleash forces “we have not seen in a generation.” Lawmakers have to ask themselves: Will there be enough money and political will remaining once the stimulus is passed “for the public investments that should be the nation’s highest priority?”