Lawmakers will need to consider whether the IRS is the best agency to handle monthly payments of the child tax credit if the proposal passes and is expanded beyond the duration of the coronavirus pandemic, according to researchers.
The Social Security Administration may be better equipped than the IRS to administer a long-term change to the child tax credit, Elaine Maag of the Urban-Brookings Tax Policy Center said on a February 11 webinar hosted by the Urban Institute.
Congressional Democrats are planning to include an expansion of the child tax credit in their next COVID-19 relief package. Their proposal would make the credit fully refundable, increase its value from $2,000 to $3,000 for children ages 6 to 17, and require the IRS to send monthly payments beginning in July rather than paying the credit as a one-time lump sum.
But Sen. Mitt Romney, R-Utah, who released a plan for a monthly child allowance to accomplish the same goal as an expanded child tax credit, proposes letting the Social Security Administration handle the monthly payments.
“The Social Security Administration knows how to do monthly payments — they do 70 million checks a month as it is,” noted Samuel Hammond of the Niskanen Center.
Short Versus Long Term
In crafting legislation for the expanded child tax credit, Congress will have to consider what can be done now and what can be done later, said Maag. And for the near future, the IRS has the advantage in the ability to get payments out the door.
“We’re in a moment right now where families are really hurting, and so we don’t have time to stand up a program that will get going in three years,” Maag said. “The IRS already delivers payments to 90 percent of families with children, so they know where the children are and they can send a payment.”
But some Democrats have their sights set on continuing the expanded child tax credit after the economy recovers. Rep. Rosa L. DeLauro, D-Conn., introduced the American Family Act of 2021 on February 8, a bill that’s similar in design to the COVID-19 relief package proposal but would make the proposed changes to the child tax credit permanent.
And because the IRS administers payments on an annual basis, it may not be as easily adaptable to change as the Social Security Administration. “You could imagine some of the problems that could arise if you start sending checks to noncustodial fathers because there’s been a divorce in the family in the interim,” Hammond said.
Maag added that there are many children who move between parents because of shared custody agreements. And because an estimated 40 percent of children in the United States are born outside of marriage, that “implies that there’s two tax units who might be supporting that child,” she said.
That makes the Social Security Administration better to distribute the credits over the long term because it has experience moving the payments with the child, Maag said.