New bipartisan proposal to boost the child tax credit: What to know

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A new bipartisan tax framework unveiled by lawmakers Tuesday would boost the child tax credit to benefit millions of American families.

the an offerreleased by Democratic Sen. Ron Wyden and Republican Rep. Jason Smith, would boost the refundable portion of the credit people can claim, allow low-income families with multiple children to get more benefits and adjust the credit for inflation.

“Fifteen million children from low-income families will be better off as a result of this plan, and given today’s dystopian political climate, it is great that we have this opportunity to pass a pro-family policy that helps so many children get ahead.” Wyden, chairman of the Senate Finance Committee, said in a statement:

The tax package also includes new tax breaks on low-income housing, disaster tax relief, and tax benefits for Taiwan.

Smith, chairman of the House Ways and Means Committee, called the proposal “a common-sense tax package that will boost Main Street businesses, rebuild communities, support American families, and strengthen our competitiveness with China.”

But the fate of the legislation in Congress is unclear.

Lawmakers are already struggling to consolidate spending measures to keep the government open and running before Friday’s partial shutdown deadline.

Also noticeably absent from Tuesday’s announcement of the tax agreement were Mike Crapo, the top Republican on the Senate Finance Committee, and Richard Neal, the top Democrat on the House Ways and Means Committee.

Wyden said his goal is to pass the package before the start of tax season, which is January 29.

IMAGE: People march in front of the US Capitol on January 11, 2024, in Washington, D.C

People walk past the US Capitol on January 11, 2024, in Washington, DC

Leah Millis/Reuters

Past impact of the expanded child tax credit

Changes to the federal child tax credit enacted in 2021 under the American Rescue Plan have had a significant impact on families.

According to Census Bureau data, 3 million children have been lifted out of poverty thanks to credit expansion. The child poverty rate in 2021 fell to a record low.

This policy significantly increased the dollar amount received by families with children from $2,000 to $3,600 per year for children under 6 years of age and $3,000 per year for children ages 6 to 18 years. Checks were sent monthly instead of once a year, which helped many families meet daily expenses.

The expanded credit expired at the end of 2021 amid opposition to its price from Republicans, especially Democratic Senator Joe Manchin from West Virginia. The cost of the one-year expanded credit was estimated at $105 billion.

After it ended, the child poverty rate more than doubled in 2022.

Since then, Democrats have called for the policy to be renewed. President Joe Biden included a boosted child tax credit in his 2024 budget proposal, which was dead on its arrival in Congress largely because of tax hikes on wealthy Americans and corporations.

The White House said Tuesday that Biden “remains committed to fighting for the expanded child tax credit” in their response to the proposed tax deal.

“We appreciate President Wyden and President Smith’s work toward increasing the child tax credit for millions of families and supporting hundreds of thousands of additional affordable homes, and we look forward to reviewing the full details of their agreement,” White House spokesman Michael Kikukawa said.

What’s in the new proposal?

While the proposal does not represent a return to the expanded child tax credit Biden implemented in 2021, lawmakers say it would make the program more generous — especially for low-income families.

According to the Domainthe maximum refundable portion of the child tax credit would increase from the current level of $1,600 per child to $1,800 in tax year 2023, $1,900 in tax year 2024, and $2,000 in tax year 2025.

It would also gradually change the way the credit is distributed to ensure “benefits are applied fairly to families with multiple children.”

Other changes include adjusting the credit for inflation starting in 2024, and allowing parents to use the current or previous year’s income to calculate their credit.

The nonpartisan Center on Budget and Policy Priorities, in a a report Released Tuesday, it said the changes would allow a single parent with two children earning $13,000 to see their balance double in the first year, or a couple earning $32,000 to get $975.

Overall, the CBPP estimates that the change could lift up to 400,000 children above the poverty line in its first year, and 500,000 or more when it takes full effect.

ABC News’ Alexandra Hutzler contributed to this report.

This article originally appeared on abcnews.go.com

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