3 tax breaks included in Biden's economic 'rescue plan'
President-elect Joe Biden’s $1.9 trillion “rescue plan” released on Thursday calls for three key tax improvements for 2021 that would help Americans across the income spectrum.
The changes would apply to the Child Tax Credit, Child Care Tax Credit, and the Earned Income Tax Credit (EITC) and relieve some financial stress brought on by the pandemic and ensuing local shutdowns.
“Broad tax programs that direct cash to people can be very helpful,” Elaine Maag, principal research associate at the Urban-Brookings Tax Policy Center, told Yahoo Money when asked about the proposal. “People can use it to solve their individual needs.”
Here are the proposed changes:
Child Tax Credit
Under Biden’s plan, the child tax credit would increase to $3,000 per child — or $3,600 for a child under 6 — for the year versus the current $2,000 per child now. It would also include 17-year-old children. Currently, the credit only applies to children under 17.
“That would be a move toward aligning the definition what child is to other parts of the tax code,” Maag said.
The Child Tax Credit would also be made fully refundable for the year, meaning families get a refund for the credit — even if it's more than what they owe. The credit is currently only partially refundable up to $1,400 and those who owe no tax must earn $2,500 to qualify for that $1,400.
“There’s no phase in,” explained Erica York, an economist at the Tax Foundation, when asked about the Biden proposal. “Everyone would get the maximum tax credit for their children. It’s really targeted at lower income households that are not receiving the full refundable credit.”
Families with children in bottom 20% of income distribution would get an average benefit of $3,400, while overall families with children would get an average benefit of $2,300, according to the Tax Policy Center. About half of the benefit would go to families in the bottom two income quintiles.
“This expansion would decrease child poverty by 45%,” Maag said. “This has a very huge impact on those very low-income families.”
Child Care Tax Credit
President-elect Biden also wants to expand this credit on an emergency basis for one year. Families would get a tax credit equal to 50% of their child care expenses for children under 13, up to $4,000 for one child and up to $8,000 multiple children.
The credit would also be refundable, and families who earn between $125,000 and $400,000 would receive a partial credit.
Before, the credit applied to only 25% to 30% of child care expenses — depending on income — with a maximum of $3,000 for one child and $6,000 for multiple children.
“This is really going to benefit middle and higher income families,” who typically have higher child care costs, Maag said. A previous analysis of a similar expansion of the credit conducted by the Tax Policy Center found half of the benefits would go to households in the top 40% of income distribution.
“It also tends to not benefit a large number of people,” Maag said. “Only about 15% of families with children benefit from this credit.”
Earned Income Tax Credit
Biden’s plan also calls for expanding the Earned Income Tax Credit, or EITC, for the year by increasing the age and income eligibility requirements and providing a bigger benefit to childless workers.
Right now, only those making $16,000 or less qualify for this credit; Biden wants to raise that cap to $21,000. He would also would expand eligibility to workers 65 and older.
Childless workers would get nearly three times more — $1,500 versus $530 — from the credit under the proposal. Overall, childless workers receive only 3% of EITC benefits under current law; Biden’s expansion would increase that share to [between] 10% to 12%, Maag said. Three-quarters of the benefits from the EITC would also go the the bottom 20% of earners.
These tax changes are only for 2021, York pointed out.
“Currently, it’s one-year proposal to help with the pandemic and those who are affected by it,” York said. “But these likely will be popular changes, which would put pressure to extend or making them permanent.”
Janna is an editor for Yahoo Money and Cashay . Follow her on Twitter @JannaHerron .
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What Biden’s American Rescue Plan means for housing
Approximately $10 billion will go toward helping homeowners struggling with mortgage payments
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President Joe Biden signed the American Rescue Plan Thursday, freeing up $1.9 trillion aimed at invigorating the economy following the COVID-19 pandemic.
The bill will send $1,400 direct payments to individuals making up to $75,000 annually, and allocates $350 billion in aid to state and local governments and $14 billion for vaccine distribution. Over $50 billion will be distributed to small businesses — including $7 billion for the Paycheck Protection Program — and $25 billion for small and mid-sized restaurants.
Per White House Press Secretary Jen Psaki, direct deposits could be hitting Americans’ bank accounts as early as this weekend.
For the housing industry, Biden’s American Rescue Plan is an enormous buoy at a time when home prices are sky-high , inventory is low, and millions are struggling to make rent and mortgage payments.
Specifically, the bill allocates $22 billion for emergency rental assistance, replenishing the Coronavirus Relief Fund.
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To receive financial assistance for rent, utilities and other house-related expenses, households must meet several requirements: total household income cannot exceed 80% of the area median income; at least one household member must be at risk of homelessness or housing instability; and individuals in the household must qualify for unemployment because of the pandemic.
Priority relief will be given to low-income families that have been unemployed for three months or more, according to White House officials.
Approximately $10 billion will go toward helping homeowners struggling with mortgage payments, and $100 million of the bill will be dedicated to housing counseling.
White House officials also said $5 billion will be set aside to fight homelessness through the conversion of certain properties into shelters. Another $5 billion will be used for emergency housing vouchers.
Treasury Secretary Janet Yellen will now begin the giant task of overseeing the distribution of the bill, which was passed quickly through Congress via the budget reconciliation process. Yellen said that while the numbers may not immediately reflect it, Thursday was a “pivotal day” for the American economy.
“With the passage of the American Rescue Plan, I believe Americans will emerge from the pandemic with the foundations of their lives intact,” Yellen said. “Our Treasury team will be doing everything we can to accelerate the recovery. We are ready to get to work implementing the measures in the Rescue Plan, including economic impact payments, expanded child tax credits, help for struggling renters and homeowners, and support for state, local and tribal governments.”
The Mortgage Bankers Association released a statement commending the passage of the bill, saying it will strengthen the overall rental and housing market.
“Specifically, we appreciate the bill’s provisions that provide additional assistance to tenants, homeowners, and businesses — particularly those in the retail and hospitality sectors,” said MBA CEO Robert Broeksmit.
Sunia Zaterman, executive director of the Council of Large Public Housing Authorities , said: “The law is also historic in nature as it represents the largest federal investment since the creation of the Great Society programs more than 55 years ago, which launched what is now known as the Housing Choice Voucher program. Estimates show that the American Rescue Plan Act’s war on poverty will reduce the projected poverty rate this year by half. This historic investment in alleviating poverty and expanding housing opportunities constitutes one of the most significant steps towards ending racial inequity since the legislation passed during the Civil Rights Era.”
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Guest Opinion: Pennsylvania businesses still need a rescue plan, lawmakers must act
Recently, the state of New Jersey invested $235 million in American Rescue Plan funds to help small community businesses like bars and restaurants and startups bounce back from COVID-19 and keep their doors open.
Then, the Garden State added $100 million to help create and expand child care programs, because working parents deserve peace of mind while on the job.
The Republican governor and GOP-controlled legislature in Ohio recently invested $155 million in American Rescue Plan funds to help small community businesses hit hard by COVID-19 in the Buckeye State.
Here in Pennsylvania? It was back in February — before the American Rescue Plan even existed — when we fought and won to create a $145 million program to help the hospitality industry but since then, the Republicans in charge of the Legislature looked at every chance to truly rebuild our economy from the community on up and they cut and ran.
More: Pa. lawmakers passed a budget on time, but here's what they didn't do
In a year when we had a budget surplus of more than $3 billion, in addition to more than $7 billion in American Rescue Plan money, the Republican majority decided to lock most of it away in a government vault for some “rainy day” in the future — as if the virus hasn’t been the most vicious storm battering our workers and business owners in more than a hundred years.
While our economy is bouncing back, the facts are clear: according to a PA Budget and Policy Center study, small business revenue is still down 28% in Pennsylvania from pre-pandemic earnings and, tragically, nearly one in four of the businesses that were up and running before the pandemic are now shut down.
These are the businesses that create the jobs and support our communities; the money spent at these local businesses is reinvested at home — and we didn’t do enough.
The fight is far from over. We will keep working for our Pennsylvania Rescue Plan and to make sure these federal dollars go where they’ll do the most good. We need to help the businesses on Main Street and the working families living on Elm Street.
Our plan — including measures supported by some of the most pro-business groups like the PA Chamber of Business and Industry — would invest in the small, local businesses that have struggled the hardest to keep their doors open during the pandemic — the mom-and-pop businesses that create the jobs that support their community. Here are some examples of how we’ll do it without raising taxes by investing more than $1 billion to do things like:
• Support businesses like theaters, gyms and social organizations that couldn’t stay open or work remotely.
• Fund grants to create new jobs in opportunity zones across the state.
• Help connect rural and urban areas to high-speed internet and invest in other vital infrastructure like safe drinking water.
• Improve access to affordable child care so working parents can have peace of mind on the job.
These are just a few parts of our plan; they’d bring us in line with what our neighboring states are already doing.
We want to do even more, like investing more than $1 billion into working families and seniors with things like hazard pay for essential workers, creating a paid sick and family leave program and supporting affordable housing.
We want to invest in careers with better pay and benefits by helping students pay for training in high-wage, high-demand industries, and help people prepare for a life after work by creating a state-run program our workers can choose to access to invest in their own retirement.
We also want to invest in our sixth-largest industry: health care. We want to raise care worker pay, expand access to telehealth and support the biotechnology industry.
We need your help — please contact your local lawmakers and tell them we need to invest in the present to build that better tomorrow we all deserve, not hide money out of fear. Tell them our community businesses need the Pennsylvania Rescue Plan.
Leader Joanna McClinton, a Democrat, represents the 191st House District, which includes portions of Philadelphia and Delaware counties.
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Local businesses, organizations hope to be included in government issued money in latest rescue plan
Millions of dollars of federal relief money is now in the hands of local governments to budget. "We're going to really look at needs, look at priorities, everyone's going to weigh in," councilwoman Jan-Michele Kearney. Kearney wants 50 million dollars put aside for Cincinnati's affordable housing trust fund. Small business owners like Joe Maas wants the local government to keep in mind start-up businesses that may not qualify for a large amount of the PPP loans. "We didn't have much payroll the year prior and that's how it was based, and even the new stimulus money that's now available, it's based on how much of a down quarter you've had year over year. Well, we weren't open in '19, so we didn't exactly have that drop," Maas said. Maas and his wife Robyn are co-owners with Dave and Nancy Berger of Northern Row Brewery. In 2019, they poured their money into starting the business with the intent to open in 2020. During the shutdown, they paid employees out of their own pocket. They then began distilling and selling hand sanitizer. "We have to wait for the guidelines from the federal government on how the money can be spent," Kearney said. Kearney said city leaders want the public's input, but as the economic struggle reaches deep, everyone hopes to get a piece of the pie. Maas said you don't need receipts to prove the impact. "If the government made you close and made you operate at reduced capacity, then your economics are being hurt," Maas said.
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The practitioners said the proposed business rescue plan would include the rationalisation of the current fleet from 27 aircraft, including the grounded Boeing 737 MAX8, to 13 737-800s and three spare 737-400s
“With the passage of the American Rescue Plan, I believe Americans will emerge from the pandemic with the foundations of their lives intact,” Yellen said
The practice of compromising statutory preferences in business rescue plans has been a bone of contention in the business rescue industry for some time. Certain practitioners are of the view that statutory
Business rescue can be a viable option for a company that has fallen on tough times but has the potential to right itself again. Within 10 business days after publication the business rescue practitioner must
Small business owners like Joe Maas wants the local government to keep in mind start-up businesses that may not qualify for a large amount of the PPP loans. In 2019, they poured their money into starting the