IE 11 is not supported. For an optimal experience visit our site on another browser.

Child tax credit, ACA subsidy extension in House Democrats' tax plan

Democrats are pushing ahead with a massive $3.5 trillion tax and spending bill with the goal of finishing it by the end of the month.

WASHINGTON — House Democrats are hoping to extend the existing child cash payments through 2025 and make the expanded Affordable Care Act subsidies permanent as part of the new tax plan lawmakers released on Monday.

Families that qualify for the child tax credit began receiving monthly cash payments from the government this summer. Those payments will stop if Congress doesn't renew the program.

The sweeping $3.5 trillion proposal currently winding through Congress is likely to be the subject to intense political jockeying over the next several weeks, but Democrats are hoping to include popular provisions like the child tax credit and pay for them with tax increases on businesses and upper earners.

Both the child cash payments and the ACA subsidies were approved on a temporary basis in the $1.9 trillion Covid relief package passed by Democrats earlier this year on a party-line basis.

Rep. Maxine Waters, D-Calif., left, Ifetayo Ewing, director of Ethel Bradley Early Education Center, and House Speaker Nancy Pelosi are greeted by students before a news conference to discuss the importance of the Child Tax Credit at the Ethel Bradley Early Education Center on Aug. 12, 2021 in Los Angeles.Gary Coronado / Los Angeles Times via Getty Images file

The new proposals released Monday by Ways & Means Committee Democrats are part of the major tax-related portions of the multitrillion-dollar safety net package Congress is currently putting together and that is a centerpiece of President Joe Biden's agenda.

The extension of the child tax credit would include some technical changes, such as allowing taxpayers who don't have a Social Security number to claim it with an Individual Taxpayer Identification Number, a Democratic aide said.

To pay for the large spending bill and tax cuts, the plan includes tax increases for the wealthy and some businesses.

The House plan raises the top marginal tax rate to 39.6 percent for individuals making more than $400,000 and for couples earning more than $450,000 per year.

The proposal implements a new system for business taxes. Rather than a 21 percent flat corporate rate, corporations would pay 18 percent on the first $400,000 of taxable income, then 21 percent on income up to $5 million, and 26.5 percent on income above that.

The committee released the bill in two batches and is expected to hold hearings on Tuesday and Wednesday. The new legislation also includes measures on prescription drug prices, clean energy and infrastructure.

One notable omission is any proposed changes to the $10,000 cap on state and local tax deductions, which numerous Democratic lawmakers from high-tax states have demanded. Ways & Means Chair Richard Neal, D-Mass., released a joint statement with Rep. Tom Suozzi, D-N.Y., and Rep. Bill Pascrell, D-N.J., saying they will work separately to add "meaningful SALT relief" to the final bill.

The same committee approved other provisions of the bill late last week, including a program to guarantee 12 weeks paid family and medical leave for workers.

The final bill is likely to be amended before it gets a vote in the full House, in order to address a host of demands from lawmakers. Democrats have a narrow majority and no hope of winning Republican votes. The legislation will also need the support of all 50 Democratic members of the Senate before it can become law.

In a report on Monday afternoon, The Joint Committee on Taxation said it found that the Democrats' corporate and international tax increases would raise $964 billion and that the high-income tax hikes would raise $1 trillion.

Sen. Joe Manchin, D-W.Va, an important swing vote, has said he wants the bill to be fully paid for. And he has called for a 25 percent corporate tax rate.

While the House is moving forward with their proposal, Senate Democrats are continuing to negotiate an agreement on their own version — and there are differences with the House plan. For example, the Senate is unlikely to accept the House prescription savings plan.

The Senate Finance Committee held a meeting last Thursday to discuss their revenue proposals but were unable to reach an agreement on many items, including the corporate tax rate. The decision is likely to get punted to Senate Majority Leader Chuck Schumer, D-N.Y., to determine what can pass.