STEVE INSKEEP, HOST:
A big part of President Biden's coronavirus relief package is focused on kids. The president says he wants to expand the federal child tax credit. That's a federal program that gives families money for each child they have - or at least it reduces their taxes. This change could help lift up to 10 million kids out of poverty, we're told. We spoke with Chuck Marr, who's director of federal tax policy at the Center for Budget and Policy Priorities, and he started by explaining what the child tax credit is now.
CHUCK MARR: So right now, Steve, the child tax credit is a $2,000 credit, and it's very simple for middle-class children and higher-income children. They just get $2,000 per year per child.
INSKEEP: Now when you say tax credit, that's different from a deduction. That means whatever my tax bill might be, I just reduce it by $2,000 if I have a kid. Is that right?
MARR: Exactly. It's dollar for dollar, and that's what makes it very powerful.
INSKEEP: You just said, though, it was for middle-class and upper-income people. What do you mean by that?
MARR: Yeah, it's simple for them. They just get the simple maximum $2,000 tax credit. For lower-income people, it's more complicated because there's a formula that phases in with their income. So they - essentially, once a low-income person passes a threshold of income of $2,500, the child tax credit phases in at 15 cents on the dollar. And so the result of that is you have 27 million children in our country who do not get the full maximum amount because their parents do not make enough money. So roughly, for example, half of the Black children in the U.S. do not receive the maximum child tax credit because their parents don't make enough money.
INSKEEP: Oh. Which you're pointing out because African Americans have a higher rate of poverty - is that why that is?
MARR: Exactly.
INSKEEP: But every kind of person - every race of person who's low income is affected by this.
MARR: Exactly.
INSKEEP: Now we're getting to what the Biden administration wants to do different. When they talk about making this tax credit refundable, what does that mean?
MARR: Right now, for low-income people who would not have a sizable income tax liability, their eligibility to the child tax credit is tied to their earnings. And what President Biden and Vice President Harris are proposing is to remove that earnings connection. So the result would be that all children essentially would receive the full child tax credit, which would now be increased.
INSKEEP: Let's talk about the politics of this, though, because I'm sure the politics are part of the reason the child tax credit is as it is now. When you have conversations with conservatives talking about tax policy, a lot are in favor of cutting taxes, the government taking less of a person's money. But when you start paying money back to people, particularly poor people, some people have a really strong, visceral reaction to that. What are the politics of this?
MARR: There is a mix. And actually, there's quite a bit of momentum on the Republican side. Prominent Republicans in the Senate have actually identified the child tax credit as an area of possible cooperation with President Biden. Senator Romney was the first Republican to advance a proposal to make a large share of the child tax credit fully refundable, exactly in line with the proposal that President Biden has advanced. Right? And there is very much an entry point here for conservatives from a family perspective. They see this as strengthening families, helping children, investing in children as well.
INSKEEP: What do you think about a provision of this tax proposal that would make it a monthly payment for people? Instead of getting one check sometime after April 15, they'd get 12 across the course of the year.
MARR: Yes. So let's take an example. Picture a single mom with a young little toddler and then a daughter who's a second-grader. And the mom, she works around her children's schedule as a home health aide, helping an elderly person get meals, shower. And she makes about $10,000 a year. So right now, she receives $600 in child tax credit per child. But under this proposal, she would receive 3,600 for the toddler, 3,000 for her second-grader. Each month, that would be about $500. And that's food. That's rent. That's clothes. It really could make a difference in those children's lives.
I think what makes this proposal so exciting is that in one fell swoop, it'll essentially lower the child poverty rate by more than 40%.
INSKEEP: Chuck Marr is director of federal tax policy at the Center on Budget and Policy Priorities. Thanks so much.
MARR: Thank you, Steve. Transcript provided by NPR, Copyright NPR.