The Child Tax Credit grows up and will lift millions of children out of poverty. TPC’s Elaine Maag and Nikhita Airia describe how the American Rescue Plan Act changes the Child Tax Credit by temporarily delivering more cash support to low-income children than any other federal program. They note, “Eighteen years ago, Representative Rosa DeLauro (D-CT) first proposed making the CTC fully refundable. Children born then have now outgrown the credit. But the expanded CTC finally achieves Representative DeLauro’s vision of providing substantial benefits to the very lowest income children. At least for 2021.”
The American Rescue Plan includes an historically large tax cut. Who would have thought it, but the relief plan proposed by President Biden and passed by a Democratic Congress includes tax cuts equal to 2.25 percent of Gross Domestic Product. TPC’s Howard Gleckman reports that this is one the biggest one-year tax reductions in modern US history, dwarfing those of Donald Trump and even Ronald Reagan. The catch: Nearly all the ARP tax cuts are due to last only for a year.
More heat on the IRS to delay the tax filing deadline. A bipartisan group of more than 100 members of Congress has jumped on the delay-the-deadline bandwagon. The letter was organized by Ways and Means Oversight Subcommittee Chairman Bill Pascrell and Rep. Jamie Raskin. So far, IRS Commissioner Charles Rettig has been unmoved and the filing deadline remains April 15.
Mississippi unlikely to switch from income to consumption tax, after all. A House GOP bill that would phase out the state income tax while raising sales, sin, and other taxes may not pass the state Senate. Lobbies representing farmers, small businesses, manufacturers, and teachers oppose it.
In the Georgia Senate, a plan for tax cuts that defy federal restrictions. The state’s Senate Finance Committee unanimously backed a House bill to raise the threshold for state income tax liability. The measure increases the standard deduction from $4,600 to $5,400 for an individual, and from $6,000 to $7,100 for married couples filing jointly. But the American Rescue Plan bars states from using federal relief dollars to finance tax cuts. Georgia would lose a dollar of $4.7 billion in expected federal aid for every tax dollar it cuts through 2024. Governor Brian Kemp and House Speaker David Ralston object to the federal restriction.
IRS will protect some stimulus payments from seizure for federal debt repayment. In a January blog post, National Taxpayer Advocate Erin Collins urged the IRS to use its regulatory authority to allow Americans with unpaid federal taxes, Social Security debts, student loan debt, or unpaid child support to retain their relief payments. On Monday, Collins said the agency agreed to do so.
The IRS now offers a Form 1040 in Spanish. For the first time, the IRS has posted to IRS.gov a Spanish language version of Form 1040 and the related instructions. The new 1040 Schedule LEP comes in English and Spanish, and instructions are available in English and 20 other languages.
TPC’s Elaine Maag will be Thursday’s guest on TPC’s webcast The Prescription. The topic will be the big changes in the Child Tax Credit and other refundable tax credits that were included in the just-passed American Relief Plan. Are these reforms an inflection point in the way the US supports families with children? To tune in tomorrow at Noon, register here.
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- © Urban Institute, Brookings Institution, and individual authors, 2020.