Millions of Families to Start Getting Monthly Child Payments in July

By Yuval Rosenberg

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.”

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