What's in Biden's New American Families Plan?
by Maurie Backman | Updated July 25, 2021 - First published on April 29, 2021
The president's proposal is designed to help parents in many ways.
In mid-March, President Joe Biden signed the $1.9 trillion American Rescue Plan into law, and with it came a host of relief, from boosted unemployment to a round of $1,400 stimulus checks that have been steadily hitting recipients' bank accounts since. And now, the president is calling on Congress to pass his $1.8 trillion American Families Plan. Here's what it entails.
Aid for parents, children, and students
As part of his plan to help Americans recover from the coronavirus pandemic and bolster the economy, Biden is proposing a sweeping aid package designed to help families in particular. Here are some key highlights of the plan:
- $225 billion toward childcare subsidies so families don't spend more than 7% of their income on childcare expenses
- $200 billion for free universal preschool for all 3- and 4-year-olds, which will help offset childcare costs for many families whose kids aren't in school yet
- $225 billion toward an improved paid family and medical leave program
- $109 billion for two free years of community college for students
- $85 billion toward Pell Grants, which are need-based grants that help offset the cost of higher education
- $62 billion in grants to increase college completion rates
- $39 billion toward subsidized college tuition for students from families earning less than $125,000 who enroll in a four-year historically Black, tribal, or minority-serving school
- $45 billion toward expanded food benefits, including the EBT program, which replaces free and subsidized school meals
- $200 billion to better subsidize health insurance premiums for those who buy an Affordable Care Act plan (the American Rescue Plan already increased subsidies, but this plan would make that permanent)
Additionally, the American Families Plan seeks to:
- Keep the expanded Child Tax Credit in effect through 2025: Right now, the boosted credit only applies for the current tax year. The plan would also make the credit fully refundable on a permanent basis. (So a tax filer can get repaid the credit's entire value from the IRS, even if their liability is below $0.)
- Have the expanded Child and Dependent Care Tax Credit remain permanent: Under the American Rescue Plan, this credit became refundable. It also increased so families paying for childcare can claim a larger percentage of their costs back.
- Make the Earned Income Tax Credit more valuable to workers without children: The American Rescue Plan expanded this credit, but Biden's new plan seeks to make the change permanent.
Clearly, this new proposal comes at a cost, and Biden's solution is to pay for it by raising taxes on the wealthy. Specifically, Biden is looking to increase the top marginal tax bracket, impose a much higher tax rate on capital gains, and cut off other loopholes that the wealthy have traditionally benefited from. However, Americans should be reassured that no one making $400,000 a year or less will see a tax increase. Rather, these changes only target very high earners.
If Biden's proposal goes through, families could soon be in line for a world of financial relief.
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