Families With Children Could Be in Line for $4,200 a Year in Stimulus Funds

Talk about massive relief.

Last year, when unemployment numbers were high and COVID-19 vaccines were in short supply, lawmakers were quick to dish out stimulus aid. Not only did a round of $1,400 stimulus checks hit Americans' bank accounts, but the Child Tax Credit got a generous boost in 2021 that raised its maximum value from $2,000 per child to $3,600. 

Just as importantly, half of the credit was paid in monthly installments from July through December. That meant that some families were eligible for up to $300 a month per child.

This year, however, there's been no stimulus check approval and no monthly Child Tax Credit payments. In fact, the Child Tax Credit's maximum value this year has reverted to $2,000. And that's put a lot of families in a very tough spot.

While the U.S. economy has been quite strong from a jobs perspective, inflation has also been rampant and gas prices have soared. That's put a lot of pressure on families, especially those that depleted their savings earlier on in the pandemic.

But now, Republican lawmakers are introducing a new proposal that could take the place of the enhanced Child Tax Credit. And if it goes through, a lot of families could be in for major relief.

Will families get a lifeline?

The Family Security Act 2.0 was recently introduced by a group of Republican lawmakers, and its aim is to provide more financial security for parents. Under the proposal, families would be eligible for a $350 monthly payment per child up to age 5 for a total of $4,200 per year. Families would also be eligible for a $250 monthly payment per child aged 6 to 17 for a total of $3,000 per year. 

These payments would be applicable to up to six children per household. And they're more generous than what the boosted Child Tax Credit allowed for last year.

But there's a catch. To receive those payments in full, families need $10,000 of income on file for the previous year. Those earning less would have their payments reduced. 

Also, the proposal includes income limits. The aforementioned payments would phase out for single parents earning $200,000 or more, and for married parents earning $400,000 or more who file jointly. 

A lifeline before children are even born

What makes this new proposal unique is that parents would be eligible to start receiving monthly payments while their babies are still in the womb. Specifically, it allows for payments to begin four months before a child's due date. 

A tricky source of funding

A big reason the enhanced Child Tax Credit didn't remain in place for 2022 was the cost involved. And that raises the question -- where will the money for this new benefit come from?

Some people may not like the answer. The lawmakers who are proposing this new tax credit are suggesting cuts to the Earned Income Tax Credit (EITC), a credit that helps low and moderate income households. 

Having children is not a requirement for the EITC like it is the Child Tax Credit, though having dependents can influence eligibility and result in a higher payday. And slashing the EITC could hurt a lot of families who don't have kids and therefore aren't able to make up the money in the form of payments under the Family Security Act 2.0.

Not only that, but the proposal calls for an elimination of the SALT, or state and local tax, deduction. That could hurt many taxpayers across the country.

Will the proposal go through?

Although the Family Security Act 2.0 may be well-intended, it does have some flaws. And some experts warn that cutting the EITC could put a lot of people in a worse financial position, even if they do have children and are eligible for monthly payments. As such, the proposal may be met with pushback. But the fact that lawmakers are trying to put money into the hands of parents is a good thing by itself.