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US President Joe Biden has signed the $1.9 trillion stimulus bill. It was designed to shoring up the pandemic-stricken US economy through perfect measures like expanded unemployment aid and direct stimulus checks. The legislation also includes measures that offer a form of guaranteed income to parents of children under 18. One expert calls it “a baby step toward universal basic income”. It is because the relief bill includes an overhaul of the CTC (Child Tax Credit). The CTC is a 24-year-old part of the nation’s tax law and it primarily benefits middle- and upper-income families. The American Rescue Plan Act overhauls the CTC by expanding the benefit from $2,000 annually to $3,600 per child. It also includes more low-income households and doles out the credit’s benefit through monthly cash payments.

Point to be noted that those changes could have a major impact on millions of families, especially low-income households and those whose earnings can fluctuate from month to month. At least 4 million children could be lifted out of poverty, especially children from Black or Latino families. The expanded CTC will require around $100 billion in additional federal spending. The CTC would be expanded to $3,600 for each child under 6 and $3,000 for each child between 6 to 17 years old under the American Rescue Plan Act. Those amounts would also be available to all low-income families. The provision also includes income cutoffs for higher-income households, similar to the stimulus checks’ income thresholds. Single taxpayers earning up to $75,000 and married couples earning up to $150,000 would receive the full credit of either $3,000 or $3,600 per child.

Families who earn too much to qualify for the expanded tax credits could still claim the base $2,000 credit for their children provided their incomes are below the current thresholds of $200,000 for single taxpayers and $400,000 for married couples. The CTC would partially be paid out on a monthly basis, instead of claimed once per year when people file their tax returns. Moreover, a family with 2 children under 6 would qualify for $7,200 in CTC payments or $600 in monthly payments. It is noteworthy that the monthly payments would run only from July through December 2021, with the other half of the CTC paid when people file their tax returns. However, the households would receive 6 months of monthly income, and then would receive the rest of the CTC through their tax refund.