From Fortune Magazine:

A new tax package is in development, with the potential to aid Democrats by expanding the Child Tax Credit and reviving three tax breaks for businesses, with a $78 billion price tag. The Child Tax Credit has seen numerous changes and is long overdue for expansion, as it is among the President’s priorities. Certain changes to the CTC would increase the credit amount for an estimated 16 million children, making the bill more favorable among Democrats.

Among other things, these changes would increase the maximum credit per child from $1,600 to $2,000 by 2025, change the “phase-in” rate to offer a full benefit to those who earn less, and allow a “lookback” period during which someone could use income from the previous year to qualify for a higher credit. According to the Center on Budget and Policy Priorities, these alterations could lift around 400,000 kids out of poverty in the first year of implementation and 500,000 by 2025.

This package would increase a number of complicated changes to the Child Tax Credit, which could lift around 400,000 children out of poverty in the first year and roughly 500,000 by 2025, without being as generous as 2021’s expansion. The Tax Policy Center estimates the average benefitting family would see a tax cut of $680 for 2023, with the majority of benefits going to families earning between $20,000 to $40,000 a year. Alongside these benefits, three business-expired tax breaks would be reinstated, also costing $33 billion.

The CTC expansion plan has been a contentious issue, as some Democrats argue that the changes do not go far enough. Republicans have historically been against expanding the credit without income limits and poverty remains an issue. On the other hand, there are supporters who believe the bill will be helpful.

The bill will be paid for by ending the Employee Retention Credit, a tax break for businesses that was implemented during the COVID-19 pandemic, and could be implemented this tax season.



Read more: Bipartisan tax deal could lift 400,000 kids out of poverty