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Child credit backers look to workarounds if budget bill stalls

Package in danger of getting put on ice until January

Sen. Ron Wyden, D-Ore., walks through the Capitol after Senate luncheons on Nov. 30, 2021.
Sen. Ron Wyden, D-Ore., walks through the Capitol after Senate luncheons on Nov. 30, 2021. (Tom Williams/CQ Roll Call)

Top Democrats are trying to tamp down concerns about disrupting the finances of millions of American families with children if expanded child tax credits don’t get extended before early next year.

The child tax credit expansion is one of the key selling points in Democrats’ $2.2 trillion budget reconciliation package, which is in danger of getting put on ice until January at the earliest due to lingering disagreements and procedural obstacles.

Eligible families have been receiving monthly payments worth up to $300 per child since July, but without an extension, the next round of payments won’t go out as scheduled on Jan. 15. 

“We want to do everything humanly possible to keep the child tax credit on track,” Senate Finance Chair Ron Wyden, D-Ore., said Wednesday. He said he was working on a potential legislative fix before senators leave Washington for the year to make sure the next payments are made.

Another option is passing stand-alone legislation to break out the child tax credit extension from the larger budget package. But Speaker Nancy Pelosi, D-Calif., threw cold water on that idea in comments to reporters, arguing that not only would it have trouble passing the Senate but Democrats could lose leverage to pass their broader budget bill, which has been billed the biggest investment in clean energy and social safety net programs in decades.

“I think that that is very important leverage in the discussion on [the reconciliation bill], that the children and their families will suffer without that payment,” Pelosi said. “Not everybody gets it on a monthly basis, but those who need it the most do.”

But Pelosi said Congress could make the monthly payments retroactive to the start of January, even if a bill doesn’t become law until after that. The legislation could include a lump sum in the first payment under a restarted program to make up for lost ground earlier in the year, for example.

Sen. Sherrod Brown, D-Ohio, said Wednesday that the IRS could still get checks out Jan. 15 even if the reconciliation bill is delayed to early 2022, citing the agency’s work to get the first-ever checks out in mid-July about four months after the expansion became law. The Senate scheduled is to come back into session earlier than usual after the December holidays, on Jan. 3, 2022.

“We’re not giving up,” Brown said.

Rep. Rosa DeLauro, D-Conn., a longtime proponent of expanding the credit, said during a press call Tuesday that she’s been told the IRS “can move on a dime” to get checks out and could work quickly if there’s a delay in passing the bill.

Another option for families if the reconciliation bill stalls is file their 2021 tax returns early next year and get the other half of their child credit payments for this year promptly. That would mean receiving up to $1,800 per child in one lump sum, potentially as early as February depending on how quickly the IRS can process tax returns.

Sweetened credit

Democrats are looking to preserve the expanded child tax credit included in their March COVID-19 relief law. The sweetened credit for the 2021 tax year provides up to $3,600 per child under age 6 or $3,000 per child ages 6 through 17, and makes the benefit fully refundable, which means it’s paid in full to families who owe less than its value in taxes.

The bigger benefit begins to phase out back to the pre-existing $2,000 credit for individuals making over $75,000 and married couples making more than $150,000, and the rest of the credit phases out for those with over $200,000 and $400,000 of income respectively. Under the current reconciliation bill, this expansion of the credit would be extended through tax year 2022 and full refundability would become permanent.

The 2021 expansion also provided for the credit to be paid in advance. The Treasury Department said Wednesday it had distributed the final round of early checks, which have gone out mid-month, usually on the 15th, each month since July. Unless taxpayers opt out, the checks have doled out half their benefit for the full year, and they can collect the rest when they file their 2021 tax return next year.

Most Democrats have touted the expansion, citing studies that show it has cut child poverty and pointing to full refundability and the monthly checks as key to that goal. The early installments are intended to help cover rent, food, school supplies, child care and other basic expenses for people who’d otherwise struggle month-to-month. Checks automatically went out to all recipients this year, but Democrats’ proposed extension would only see them go to lower-income recipients.

Now many are concerned those payments could lapse if the reconciliation bill doesn’t pass by the end of the year, creating a crunch for the IRS in its effort to get checks out by mid-January. Wyden said that the broader bill would need to pass by Dec. 28 for the IRS to get payments out on time, a deadline that’s appeared increasingly unlikely.

Sen. Michael Bennet, D-Colo., said that he plans to speak with Majority Leader Charles E. Schumer’s office and the White House about making sure January checks go out.

‘Not at this moment a fan’

Proponents of the child tax credit are also concerned that Sen. Joe Manchin III of West Virginia — the near-lone Democratic critic of the expanded benefit — could pare back what’s currently in the bill.

To appease Manchin, Democrats already limited monthly checks to individuals who make up to $75,000 and married couples with income up to $150,000, and trimmed their extension to only one year.

“He is not at this moment a fan of the child tax credit,” Bennet said on a press call Tuesday.

Manchin didn’t like monthly checks going out to those who could be seen as wealthy, according to a source familiar with the negotiations. He’d urged work requirements and called for further means testing of the benefit.

Manchin also demanded spending cuts that led to a shorter expansion. The Joint Committee on Taxation estimated that the child tax credit provisions in the bill now would cost $185 billion over the next decade.

Axios reported this week that Manchin has expressed concerns to colleagues that the child tax credit expansion could drive inflation and is underpriced when considering the cost of future extensions. Manchin said Wednesday that he doesn’t want the child tax credit expansion cut out of the bill, and has “always been for the child tax credits.” But he wouldn’t say whether he wants to extend the benefit as-is.

Reports of new criticism from Manchin are making other Democrats wary of further cuts to the expansion. Some believed the issue was closed weeks ago and that Manchin had agreed with the White House to what’s in the bill now.

“That is the operating assumption that all of us have had,” Bennet said. “And it’s bewildering to me why we would at a moment when families are facing the kind of, you know, increases in prices that families are facing that we would raise their taxes.”

The Treasury Department reported Wednesday alongside the final 2021 checks that it had sent more than $92.7 billion in payments during the second half of this year. Of those funds, $470.7 million went to West Virginia families. The December round of checks went to 305,000 qualifying children in the state with an average payment of $446 per check, which was about the national average value.

Activists in West Virginia and colleagues alike have put pressure on Manchin to back the child tax credit. And while some were concerned about further cuts, Brown said he believes the provisions will make it through the Senate intact.

“I don’t want to skip anything with them,” Brown said of the monthly payments. “This is very significant in people’s lives.”

Lindsey McPherson, Mary Ellen McIntire and Paul M. Krawzak contributed to this report.

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