President Joe Biden’s $1.9 trillion American Rescue Plan, passed last March, enabled the federal government to give eligible parents as much as $3,600 per year for a child under the age of six and up to $3,000 for children between ages six and seventeen. This means that a $250 or a $300 payment for each child has been directly deposited each month and will continue through December. 

So, what will happen to these enhanced child tax credit payments come January? If the Democrats can gain the passage of the most recent version of their $1.75 trillion social and climate plan, they are indeed set to continue for another year. 

Massive Cut Waiting?  

However, do take note that by the year 2026, these direct payments could potentially plummet to $1,000 per child if Congress decides to stand pat.  

“That possibility is due to key aspects of two laws: a 2017 tax law passed by the Republican-controlled Congress, and the American Rescue Plan passed in March by the current Democratic majority,” according to CNBC. “Both laws raised the credit’s value (among other changes)—but only temporarily.” 

“The 2017 law boosted it to $2,000 per child under seventeen years old, up from $1,000. The American Rescue Plan enhanced it further for low- and middle-income parents: up to $3,000 per child under eighteen, and $3,600 for kids under six. . . . The 2017 law, known as the Tax Cuts and Jobs Act, raised it through 2025. At that point in time, the value would fall to the level pre-Tax Cuts and Jobs Act,” CNBC continued.  

Congress, though, could eventually step in and take another look at the funding. That is the hope of millions of parents who are currently on the receiving end of the payments.  

“There’s a long history of the child tax credit being expanded temporarily, and when the deadline hits it gets extended again,” Elaine Maag, a principal research associate at the Urban-Brookings Tax Policy Center, told the business news site.  

“So it’s not clear to me we should assume the whole tax law will come back in,” she added.  

Hurting Low-Income Households  

If the current law does expire, then the nation’s low-income households would likely suffer the most. According to research from the Center on Budget and Policy Priorities, it revealed that more than nine in ten American families with annual incomes below $35,000 are tapping into the credit payments to cover basic household expenses like food, clothing, shelter, and utilities.  

In addition, the Census Bureau’s Household Pulse Survey showed that the number of adults living in households with children that reported not having enough to eat has plunged by 3.3 million due to the credits—a total reduction of about one-third.  

A separate report released by the Annie E. Casey Foundation is contending that a permanent expansion of the credits could potentially lift more than four million children out of poverty.  

Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.  

Image: Reuters