Most of the media coverage of President Joe Biden’s $1.9 trillion stimulus plan has revolved around a few central themes – direct payments to some Americans of $1,400 per person, money for states and schools, and some of the projects that might get cash that are completely unrelated to COVID-19.
There is another section of the House bill currently being debated in the Senate that has been underreported that should be of great interest to working individuals and families, a change to the Child Tax Credit (CTC).
Biden and Democrats have proposed increasing the CTC up top $3,600 per child under age 6 and $3,000 for children up to age 17 for one year to help combat the economic damage of the pandemic.
The plan would also authorize periodic "child allowance" payments to families from July to December of this year. Half the total credit amount would be paid in advance while the other half would be claimed on the tax return that you'll file next year.
This change would only be for one year under the legislation being debated but some liberals are pushing even further to make the tax credit permanent. Biden himself said late this week he would consider supporting it.
That’s important information to note because the change would directly affect a lot of taxpayers who either find themselves paying in at tax time, breaking even because of the credits or, in some cases, getting a refund.
On paper, the idea of increasing the CTC looks appealing to any family with children, but in reality, the credit would benefit lower income to no income individuals much more than middle class workers. In fact, in some cases the new credit and monthly payments could prove to be a an issue come April 15, 2022.
The Child Tax Credit has been around for about 25 years and currently eligible families can claim a credit - which reduces income taxes they owe dollar-for-dollar – of up to $2,000 per child under age 17 who is a citizen of the U.S.
Families who owe little or no income tax can get cash of up to $1,400 per child, a feature which makes the tax credit partially “refundable.”
Other dependents – including children ages 17 and 18 and full-time college students ages 19 to 24 – are eligible for a non-refundable credit of up to $500.
Right now the size of the credit is reduced by $50 for every $1,000 of adjusted gross income above $200,000 for single parents and $400,000 for married couples.
The House stimulus bill calls for the revised credit to phase out in a similar way when incomes exceeded $150,000 for a household, or $75,000 for individuals.
What does that mean?
Well, for example a married couple with two children and an income of $200,000 would not get the full $3,000 per child credit. They would receive $2,000 per child (the same credit they get now).
Except under this proposal it is basically split as the couple would be eligible for a $333 monthly payment from July through December of 2021 and then would be able to claim a $2,000 credit on their 2021 taxes next year.
One issue is a family with an income of $200,000 – kids or no kids - is typically not getting a tax refund each year and if they aren’t deducting enough from their pay checks during the year, they are probably sending a check to the IRS to make up the difference.
So when it comes to the monthly payment being discussed, that same family has only one choice – put it in the savings account and send it back to the IRS come tax time. If the money is spent, then they have “lost” $2,000 worth of credit that was previously used to knock down their tax burden.
That makes little to no sense. Why not just give people the option to use the credit now or later?
And it is not just the upper middle class that will need to do some pre-planning if the bill passes. A married couple making $125,000 per year with two kids, would be eligible for the full $3,000 per child tax credit, but would get half of it in advance and the other half as a credit on their 2021 tax returns.
Again, they may find themselves owing come tax time, as currently their tax credit is $4,000 and under the Biden plan that credit will equal $3,000.
Something to think about when that “free” government money comes rolling in regardless of income level.
Of course, if you were a parent in the 1970’s and 80’s and lived through 17 and 18% mortgage rates and no child tax credits, you might be asking yourself just how fair this whole set up is.
But it is typical of a system that doesn’t seem to care much for rewarding the hard work of its citizens once they reach a certain age and a government determined to bankrupt us all in the name of wealth redistribution.
Finally, there is this: If you find yourself asking, what’s next, when you see stories about Mr. Potato head’s gender, or the offensive imagery of the Muppet Show, then it’s probably too late to stop the cancel culture cloud that is hanging over our country.
The latest victim is Dr. Suess, the renowned children’s author. The man who wrote his first book in 1937, might be a racist.
Everyone but me apparently.
Dr. Suess Enterprises announced this week that a handful of his books would no longer be sold because, in their words, the “books portray people in ways that are hurtful and wrong.”
I’ll be sad to see the doctor go even though I don’t think I’ve ever read anything besides “The Cat in the Hat,” but with his vanquishing I see an opening in the children’s book market so I’d like to share an excerpt from my forthcoming book I’m am writing under the working title: “Hairy Legs and Popcorn.”
“the sun did not shine. it was too wet to play.
then along came Joe Biden to brighten the day.
with Corn Pop in tow. teleprompters to spare.
the hairy legged man did finally declare.
do not read that book. it is bad for your eyes.
do not read that book. it’s filled with such lies.
The illustrations are wicked. they will cause such a fit.
we do not like those drawings. not one little bit.
so read what we tell you. believe what we say.
as we rewrite history day after day after day.”