39 Million Families to Start Getting Monthly Child Payments in July
About 39 million families will start receiving payments from the new, refundable child tax credit on July 15, the Treasury Department announced Monday.
Authorized by the $1.9 trillion American Rescue Plan signed into law by President Joe Biden in March, the expanded and “newly-advanceable” tax credit will provide assistance to families that include about 88% of American children, the administration says. Starting in July and continuing through the end of the year, eligible families will receive up to $300 per child under the age of 6 and up to $250 for those aged 6 to 17.
Couples with incomes up to $150,000 and single filers with incomes up to $75,000 qualify for the full credit, which phases out at higher income levels.
Administration officials said about 80% of eligible households will receive the payments automatically through direct deposit. The monthly payments will provide half of the total credit, with the rest of the money coming as a lump sum paid as a tax refund.
Speaking at the White House, Biden portrayed the payments as a tax cut that was providing immediate relief to families. “We are getting you a tax cut this year — now, when you need it, and not have to wait,” Biden said. “This tax cut sends a clear and powerful message to American working families with children: Help is here.”
Biden also made a pitch to lawmakers to turn the temporary tax credit into a permanent benefit. “While the American Rescue Plan provides for this vital tax relief to hard working families for this year, Congress must pass the American Families Plan to ensure that working families will be able to count on this relief for years to come.”
A major change: Democrats have expanded the existing child tax credit, raising its top value from $2,000 to $3,600 per child, and turned it into a payable benefit rather than a refund paid once a year, and then only to households that file taxes. The new tax credit structure is expected to slash childhood poverty in the U.S., at least temporarily, by providing more money and by reaching a much larger group of families, many of whom failed to receive benefits under the previous system.
The impact comes with a substantial budgetary cost, however. If Congress were to make it permanent, the child tax credit could cost more than $200 billion per year, potentially making it the largest single tax break.
Business Leaders Confident They Can Kill Most of Biden’s Tax Hikes: Report
Business leaders are confident that they can stop almost all of President Biden’s proposed tax hikes by pressuring moderate congressional Democrats, Politico’s Ben White reports.
“With business-minded and more centrist members on the Democratic side in both the House and Senate, they look at the scope and breadth of these tax increases for the infrastructure and families plans and they just find them jaw-dropping,” Neil Bradley, chief policy officer at the U.S. Chamber of Commerce, tells White. “From a raw political perspective, it would be a really funky decision for these moderates to say they would be willing to put this much of a wet blanket on an economy that is really poised to take off.”
Executives and lobbyists tell White that an increase in the corporate tax rate from 21% to 25% may be likely, but Biden’s calls for raising the top marginal tax rate from 37% to 39.6% and hiking the capital gains tax for the wealthy, among other proposals, are likely to run into opposition from centrist Democrats. And, they argue, progressives may be more focused on enacting new spending programs than on pushing through tax hikes to pay for them. “If the executives are right, Biden will have to either break his pledge to pay for his massive spending agenda and further swell the deficit or he'll have to sharply scale back his plans,” a step that would anger progressives, White writes.
The White House has defended Biden’s plans, arguing that the tax increases are an essential and popular way to pay for much-needed investments meant to address critical structural problems and inequities, and that the tax changes won’t hurt the economy.
And while Democrats are clearly still grappling with intraparty divisions and messaging strategy, Politico’s Sarah Ferris notes that some in the party see a path to passing tax hikes: “going on the offensive” about the tax hikes while blaming Republican policies, including the 2017 tax cuts, for economic problems.
“It’s important for people to understand this isn’t some radical new idea,” Rep. Susan Wild (D-PA), who represents a swing district and reportedly backs many of Biden's tax plans, told Politico. “This is not socialism. This is, 'How do we pay for things that we actually need?'"
Massive Backlog at IRS as Tax Day Arrives
With Tax Day finally arriving Monday, delayed from its usual date in April due to pandemic-related changes to the tax code, last-minute filers should prepare for what could be a long wait to get their refunds.
Even before the tax filing deadline, the IRS had a backlog of more than 30 million returns that still needed processing, according to the Taxpayer Advocate Service. The flood of new returns on Monday is expected to make matters worse.
“Taxpayers will continue to experience unusually long delays,” National Taxpayer Advocate Erin M. Collins told CBS MoneyWatch. “I don't think anyone wants to hear that, but that is the case.”
The backlog is a mix of 2019 returns, the processing of which was severely delayed by the closure of many IRS offices last year, and 2020 returns that have been stacking up behind them.
Changes in the tax system related to the pandemic, including new tax credits and the issuance of stimulus checks, are adding to the delays. Adjustments to stimulus payments require manual review by the IRS, a time-consuming process even in the best of circumstances.
The IRS expects to receive about 160 million tax returns this year, with about 40 million of those arriving on or after the May 17 deadline.
The Average American Will Pay $525,000 in Taxes Over Their Lifetime: Study
The average American will pay $525,037 in taxes over their lifetime, according to a new study by financial technology company Self.
The report says that represents an average of 34.3% of lifetime earnings. Nearly two-thirds of the total, or roughly $340,000, comes from taxes on earnings, with the rest made up of sales, property and car taxes.
The lifetime total varies greatly by state. Residents of New Jersey will pay an average of $931,698, the highest total and greatest percentage of estimated lifetime earnings, 49.51%. (You can see the rest of the top 10 in the Bloomberg chart below.) Residents of West Virginia are projected to pay the least in total taxes ($321,000), while residents of Alabama will pay the smallest percentage of their earnings (24.48%).
The study used data from the 2019 Consumer Expenditure Report from the Bureau of Labor Statistics and divided household spending by two to estimate spending per person. It then applied state and federal tax rates to those spending and earnings estimates based on a worklife of 36 years and an average life expectancy of 79 years.
Pandemic Hit Less-Educated Workers the Hardest: Fed Report
The Covid-19 pandemic caused unprecedented damage to the economy in 2020, but relief and stimulus measures undertaken by the government offset the harm for many households, according to a new survey of the economic well-being of U.S. households from the Federal Reserve Board of Governors.
By the end of 2020, about three-quarters of Americans said they were doing at least okay financially, about the same as before the pandemic began, the report says. Readings on several key measures in the survey of 11,000 adults were similar to 2019 levels, including rates of bank account ownership, preparedness for retirement and funds available to meet emergency expenses.
But not everyone was able to weather the economic storm, and about one in four adults said they were in worse financial shape than the year before, with the greatest harm accumulating among less-educated workers and lower-income households. “A clear pattern from the survey is that financial challenges in 2020 were uneven, and frequently left those who entered the year with fewer resources further behind,” the report says.
Job loss was a key factor. Less than a quarter of workers who lost their jobs had returned to their old positions by the end of 2020. Those who kept their jobs, including many college-educated, white-collar workers, “generally had stable or improving finances in 2020,” the report says. “However, those who suffered a layoff and an extended period of unemployment saw a deterioration of their financial circumstances.”
- Americans Spend Hours and Hours Preparing Their Taxes. We Shouldn’t Have To – Helaine Olen, Washington Post
- Abolish the Tax Code’s Single-Parent Penalty – Rep. Katie Porter (D-CA), Washington Post
- Are Unemployment Benefits Keeping People From Working? We Will Soon Have an Answer – Henry Olsen, Washington Post
- Why the GOP Has Gone Quiet Over Tax Hikes – Rahm Emanuel, Wall Street Journal
- The GOP Needs To Make a Realistic Counteroffer to Biden’s Infrastructure Plan – Washington Post Editorial Board
- Pick Your Fights Carefully, Joe Biden – Jonathan Bernstein, Bloomberg
- Biden Should Fight the Inflation the Fed Ignores – Matthew Yglesias, Bloomberg
- This Inflation Scare Is Exactly What the Fed Was Hoping to Avoid – Peter Coy, Bloomberg Businessweek
- This Is What Inflation Would Look Like Without Used Cars and Trucks – Joe Weisenthal, Bloomberg
- Abolish the Debt Ceiling—by Raising It to One Googolplex Dollars – Matt Ford, New Republic
- Biden's First Bipartisan Achievement Might Be on Technology Investment – Aaron Schaffer, Washington Post
- The CDC’s Mask Guidance Is a Mess. Biden Needs to Clean It Up – Leana S. Wen, Washington Post
- The Government Has a Program to Cut Your Internet Bill. Verizon Is Using It to Force You Onto a New Data Plan – Geoffrey A. Fowler, Washington Post
- 723 Epidemiologists on When and How the U.S. Can Fully Return to Normal – Claire Cain Miller et al, New York Times
- Biden’s America: Democrats See Competence, Republicans See Chaos – Matt Viser and Sean Sullivan, Washington Post