The Biden administration announced Monday that roughly 39 million American families will begin receiving direct cash payments in July under a child benefit created by Democrats’ coronavirus relief bill.
The Internal Revenue Service on July 15 will start delivering a monthly payment of $300 per child under 6 and $250 per child 6 or older for those who qualify. The monthly benefits will be deposited directly in most families’ bank accounts on the 15th of every month – or the closest day to that date, if the 15th falls on a holiday or weekend – for the rest of the year, without any action required. For instance, an eligible family with two children ages 5 and 13 will receive $550 from the IRS directly to their bank accounts on or close to the 15th of every month from July to December.
Biden administration officials estimate that households representing more than 65 million children – or 88% of all U.S. kids nationwide – will begin receiving the benefit through direct deposit, paper checks or debit cards. Of that population, roughly 80% will be sent the cash directly via direct deposit, administration officials told reporters on a call Sunday. High-income parents will receive a smaller benefit or none at all, depending on how much they make. The credit diminishes for individuals with adjusted gross income of more than $75,000, as well as couples earning more than $150,000.
The new program represents one of President Joe Biden’s most important domestic policy initiatives and could have significant political consequences as the White House seeks to reshape the U.S. economy. In March, congressional Democrats approved a $1.9 trillion relief plan that expanded an existing $2,000-per-child benefit, increasing its annual value to $3,600 per child under 6 and to $3,000 for older children. The benefit was also expanded to cover tens of millions of low-income families who were previously too poor to receive it in full. America has had one of the highest child poverty levels among rich nations, something supporters of the expanded benefit hope to change.
The Biden administration is now working to implement that law. Democratic lawmakers had intended to require the IRS to send the payments out monthly, a measure designed to accommodate families’ short-term income shocks. They were ultimately forced to leave the timing question up to the tax agency under the arcane rules of the legislative procedure they used to pass the measure. The IRS on Monday for the first time said it will be able to administer it on a monthly basis, in line with many Democrats’ original intention.
Biden proposed extending the enhanced child benefit through 2025 in the American Families Plan he introduced last month. He also has said that the administration aims to make the new benefit permanent, although how Democrats would do so remains unclear.
Approximately half of children in “deep poverty” live in households that do not file taxes and therefore will be hard for the IRS to reach, according to the People’s Policy Project, a left-leaning think tank. That could reduce the antipoverty effect of the legislation, with the White House’s estimates that the policy will halve child poverty probably a dramatic overstatement, the think-tank said.
“With two parents, two kids, that’s $7,200 in the pockets you’re getting to help take care of your family,” Biden said in his address to Congress in April. “And that will help more than 65 million children and help cut child-care poverty in half, and we can afford it.”
Conservatives have strongly criticized the measure, particularly because it changed the existing program by giving the same amount to parents who do not work as parents who do. Congressional Republicans have said the plan will discourage parents from working. Traditionally, both Democrats and Republicans have resisted giving direct cash benefits to nonworking families – a stance that began to shift during the pandemic, when Congress on a bipartisan basis sent hundreds of billions in stimulus payments.
The expanded credit is estimated to cost approximately $150 billion per year, according to the Committee for a Responsible Federal Budget, a nonpartisan think tank.
“Democrats chose . . . simply handing out cash to parents, including ones already on welfare or in households where nobody is working,” Sens. Marco Rubio, R-Fla., and Mike Lee, R-Utah, said in a statement last month. “This kind of universal basic income makes more Americans dependent on government and severs the vital elements – work, marriage, community, and beyond – required to raise healthy families.”
Significant implementation problems loom that could hamper the program’s effectiveness. Eligibility is based on prior year income status, which is necessary for the IRS to prevent rich Americans from receiving the benefit. But that decision opens up other implementation challenges, as family income and custodial status can change frequently.
Administration officials also told reporters Sunday that they will create two online portals to help Americans receive their payments from the IRS. One is for Americans who do not traditionally file income taxes. It would in particular help poor Americans and groups that work with the homeless to secure their new benefit. The second, separate portal will allow families to tell the IRS about changes in custodial status, or for the family to tell the IRS it wants to receive the benefit in full at tax time at the end of the year rather than on a monthly basis.
These measures could still prove difficult to implement. However, administration officials stressed that the vast majority of families do not have to do anything to receive the benefit.