Almost a year after President Joe Biden’s trillion-dollar Build Back Better spending plan was voted down by the Senate, the reimagined version has finally been signed into law. The Inflation Reduction Act, which is supposed to reduce the deficit by more than $300 billion over a decade, includes a $369 billion investment in climate and energy policies, $64 billion to extend a policy under the Affordable Care Act to reduce health insurance costs, and a 15% corporate minimum tax aimed at companies that earn more than $1 billion a year. While key components of the bill had to be negotiated out, like continuing the monthly child tax credit payments and tax cuts for the middle class, the bill will increase benefits for Medicare part D beneficiaries and offer tax credits for energy-related home improvements.
“We’re obviously disappointed that the child tax credit was not included in the Inflation Reduction Act,” said Teri Olle, the California campaign director for Economic Security Project Action. “The child tax credit would cover a lot of the inflation and rising costs of regular goods that people are dealing with in terms of food, gas, and would help with the lagging economic recovery for the lower wage workers in this country. So we remain perplexed as to why it was not included.”
Child tax credit payments, which were expanded in March 2021 from a total of $2,000 to $3,600 for qualifying children under the American Rescue Plan, officially stopped in December 2021. According to census data, Black Americans had the highest poverty rate in 2020, with 19.5% falling below the poverty line in 2020, and Latinx people had a 17% poverty rate. Though white parents were more likely to take advantage of the child tax credit, low-income parents and parents of color were significantly more likely to benefit from the payments to pay off debt. As inflation reaches a 40-year high, with consumer prices 9.1% higher than they were this time last year, the cost of living has become even more challenging to meet. Many parents of color say they have been struggling without the added assistance of monthly payments without the child tax credit. According to research by Columbia University’s Center on Poverty and Social Policy, the monthly distribution of tax credits meaningfully reduced child poverty and kept it low year-round. Once the payments ended, 3.7 million children were pushed below the poverty line, rising from 12.1% in December 2021 to 17% in January 2022.
Natacha Chavez, a mom of two based in Phoenix, is a community organizer who used her $500 payments to take care of surprise medical costs like major dental work for her 7-year-old daughter and eyeglasses for her 10-year-old son. Now that her husband is in between jobs and their new insurance has not yet kicked in, she will have to pay for her daughter’s dental work out of pocket.
“It’s frustrating because it feels that once again quite frankly, D.C. does not truly care for American families or truly understand what the average American family is going through,” Chavez said. “I understand there’s a lot of things in the package that will benefit everyday families, especially when it comes to the health insurance component portion of it, but it’s sad to say that those are one of the issues that are on the chopping block and being cut out.”
For Medicare Part D beneficiaries, the Inflation Reduction Act will cap all out-of-pocket drug costs to about $4,000 annually in 2024 and lower that cap to $2,000 in 2025. The spending package is expected to raise $737 billion in revenue over the next decade, with roughly $124 billion expected to come from increased IRS enforcement, meaning tougher and more frequent audits for wealthy Americans. The bill passed the U.S. Senate 51-50 on Aug. 7 with no Republican votes, and the U.S. House passed the bill Friday by a 220-207 margin.
Olle hopes Congress will include the child tax credit in the tax extenders package before the end of the year.
“I think because of all the energy around the Inflation Reduction Act, people had sort of taken a pause on the child tax credit, but now it’s time to renew and focus our energy there,” Olle said. “It’s really important that we renew this incredibly important policy for kids.”
