The plan includes a one-year extension of this year’s child tax credit expansion, free preschool for 3- and 4-year-olds, and subsidies for child care costs, among other changes to social programs. The White House provided a rough outline of the proposal, but it will be up to Congress to flesh out the details and pass legislation. “This is a fundamental game changer for our families and for our economy, because more parents—especially women—can get back to work,” Biden said of the framework’s child care provisions, in a speech about the budget proposal.The spending plan costs $1.75 trillion over 10 years—cut in half from Biden’s original $3.5 trillion proposal, and is paid for by new taxes on large corporations and multimillionaires and billionaires, by increasing IRS tax enforcement, and by closing tax loopholes. Democrats, who need all 50 of their senators on board to pass the plan through a process known as budget reconciliation, were forced to pare down their proposals after months of negotiations to win the support of Sens. Joe Manchin and Kyrsten Sinema, who insisted on cutbacks. Here’s how the spending bill—if it passes Congress—could affect your finances:
The child tax credit expansion, which boosted the value of the credit to a maximum $3,600 per child from $2,000 for 2021 and started delivering up to $300 a month per child as advance monthly payments, will be extended through 2022. The credit was also made fully refundable, making its full value available to people who previously didn’t earn enough income to deduct it from their taxes. The proposed framework makes the refundability permanent. Free preschool nationwide for 3- and 4-year-olds will be funded for six years. That could save families who pay for it an average of $8,600 annually, according to a White House estimate. Child care costs will be capped at 7% of family income for the care of children under 6 for households making less than 2.5 times the median income in their state, with lower-income families receiving more support on a sliding scale. The aid comes with a requirement that the parents are either working, looking for work, or in an education or training program. The White House estimates that a couple making $100,000 would save more than $5,000 on child care for a toddler. This year’s increased health insurance subsidies for private plans purchased on government-run marketplaces will be extended through 2025, saving people who buy insurance through the Affordable Care Act an average of $600 per year, the White House estimated. This year’s expansion of the Earned Income Tax Credit for low-income earners, which nearly tripled it for childless workers—for a maximum credit of $1,502—will be extended for one year. Medicare will now cover hearing aids and hearing exams. Home care support for the elderly and disabled, under Medicaid, will be expanded, although the White House did not provide detailed information about this policy. Green energy tax credits will be offered for making energy efficiency and clean energy upgrades, including an incentive to install home solar panels and a credit for buying a U.S.-made electric car that would save middle-class families $12,500.
The bill will be paid for by a series of measures aimed at corporations and high-income earners, including:
Taxes on large corporations, including a surcharge on stock buybacks and a tax on foreign profits of U.S. corporations to discourage job outsourcing. Taxes on high income earners, including a 5% extra tax for those earning $10 million or more, and an additional 3% tax on incomes over $25 million. Loopholes would also be closed that the administration says allow the wealthy to avoid paying a 3.8% tax for Medicare. Funding the IRS to pursue tax cheaters, focusing increased enforcement of existing laws on people who make more than $400,000 a year.
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