Santa Claus came earlier: Biden Unveils $1.8 Trillion American Families Plan: Here’s How It Will Affect Your Bottom Line
Kelly Anne Smith
Forbes Advisor Staff
Updated: Apr 29, 2021, 2:27pm
Just over a month after signing a giant stimulus package into law, President Joe Biden is set to introduce his plan to improve the U.S. social safety net.
Biden will present his $1.8 trillion American Families Plan to Congress on Wednesday night. The plan aims to expand anti-poverty measures the president implemented in the wake of the Covid-19 crisis and prioritizes helping working- and middle-class American families.
“It is not enough to restore where we were prior to the pandemic,” reads a fact sheet from the White House. “We need to build a stronger economy that does not leave anyone behind–we need to build back better.”
Included in the plan are provisions to make temporarily-expanded tax credits permanent, implement federally-mandated paid family leave and expand nutrition assistance. The plan is expected to face fierce opposition from Republicans—but still has a chance at becoming law thanks to reconciliation.
Biden plans to pay for his plan by taxing high-income Americans. The plan would increase the top individual tax rate from 37% to 39.6%, and would raise the capital gains tax rate from 20% to 39.6% for taxpayers making over $1 million.
What’s in the American Families Plan?The American Families Plan includes a wide range of provisions aimed at supporting Americans in child care, education, family leave and more. Highlights of the plan include:
National Paid Family and Medical LeaveThe United States is one of the only industrialized nations in the world that doesn’t guarantee some kind of paid family leave.
Biden’s proposal would guarantee 12 weeks of paid parental, family and personal illness/safe leave. The pay would be equal to two-thirds of the worker’s average weekly wages, up to $4,000 per month. Workers in the lowest wage cohort would have 80% of their average weekly wages replaced.
The proposal would allow workers to bond with a new child, care for a seriously ill loved one, adjust to a military deployment, find safety from sexual assault, stalking or domestic violence, cope with their own serious illness or grieve the death of a loved one. It will also require employers to allow workers to accrue seven days of paid time off to seek preventive medical care for themselves or their family.
The pandemic has exacerbated a hole in the social safety net, especially when it comes to women, many of whom were forced to take on additional caregiving roles as schools and daycares shuttered during the pandemic. The White House factsheet estimates more than 30 years of progress in the women’s labor force participation rate has been erased by the pandemic. The unemployment rate of women 20 years and older jumped from 3.9% in March 2020 to 5.7% in March 2021.
Biden’s plan for paid family and medical leave would cost $225 billion over 10 years.
Expand Tax Cuts for Working FamiliesBiden’s last stimulus package, the American Rescue Plan, made temporary expansions to a wide range of tax credits. The American Families Plan calls on Congress to expand or make those changes permanent, including:
Make Affordable Care Act premium tax credits permanent. The American Rescue Plan Act (ARPA) provided premium tax credits to lower insurance premiums bought through the health insurance marketplace. The American Families Plan would make premium reductions permanent by investing $200 billion in them. The White House estimates nine million people will save hundreds of dollars on their insurance premiums per year, and four million uninsured people will gain coverage as a result.
Further Extend The Expanded Child Tax Credit (CTC). ARPA expanded the CTC from $2,000 per child to $3,000 per child ages 6 to 17, and $3,600 for children under 6. The plan also gives the option of receiving the credit through monthly payments starting in July, instead of having to wait to claim the entire credit on your taxes. The American Families Plan would keep these changes to the CTC through 2025. The Institute on Taxation and Economic Policy, a nonprofit, non-partisan tax policy organization, estimates families in the lowest 20% wage percentile would receive a $4,520 income boost in 2022 from the expanded CTC alone.
Make the Earned Income Tax Credit (EITC) expansion permanent. The EITC is a refundable tax credit that helps low- to moderate-income workers and families. It can reduce how much tax you owe, or generate a refund. ARPA nearly tripled the tax credit for working class families and benefitted 17 million low-wage workers. Biden’s new proposal calls on Congress to make the expansion permanent.
Permanently increase the Child and Dependent Care Tax Credit (CDCTC). The CDCTC is a tax credit to help working parents cover child care expenses. ARPA expanded the credit to as much as 50% of spending on qualified child care costs for children under the age of 13, (up to a total of $4,000 for one child or $8,000 to two or more children) —and change the credit from nonrefundable to refundable, meaning it can generate a tax refund or reduce how much you owe in taxes.
The 50% reimbursement is for families making less than $125,000 per year, and can be used for full-time care expenses, after school care and summer care. Families making between $125,000 and $438,000 can receive a partial credit. The American Families Plan calls on Congress to make this expansion permanent.
Provide Free Community CollegeThird-level education costs in the U.S. continue to climb. U.S. News and World Report data shows that average yearly tuition and fees at a private university for the 2020-2021 school year is $35,087; public, out-of-state universities cost $21,184 annually, and public, in-state schools cost $9,687. The American Families Plan aims to reduce college costs, expand higher education opportunities and invest in communities of color.
The American Families Plan would offer two years of free community college to all Americans, including DREAMers. First-time students and workers who want to learn new skills would be able to use the benefit over a three-year period, and in some cases, up to four years for part-time students. AFP would invest $109 billion into these resources.
Federal financial assistance to pay for higher education would also be expanded under the plan. Pell Grants would be increased by $1,400 to total $7,745, and access to the award would be expanded to DREAMers.
The American Families Plan also makes large investments in higher education opportunities for communities of color in an effort to mitigate inequalities in postsecondary education.
Historically Black Colleges and Universities (HBCUs), Tribal Colleges and Universities (TCUs) and Minority Serving Institutions (MSIs) would receive $39 billion to provide two years of subsidized tuition for students coming from families earning less than $125,000 and are enrolled in four-year programs.
Biden’s proposal also would invest $200 billion to create free preschool to all three-and four-year-olds, citing an estimated saving of $13,000 for the average family.
Nutrition SupportThe pandemic revealed how critical facilities like schools are for low-income and communities of color when it comes to getting children nutritious meals. The American Families Plan aims to expand access to nutrition for children by investing $45 billion in nutrition support.
The plan would make the Summer Pandemic-EBT plan, provided by the American Rescue Plan, permanent. Doing so means all 29 million children receiving free and reduced-price meals during the school year will continue to have access to them when classes are out for the summer.
Biden’s plan also expands the Community Eligibility Provision (CEP), a program that allows high-poverty schools to provide meals free of charge to all of their students. Additionally, schools that adopt specific measures for healthy food offerings will receive a reimbursement, similar to the healthy food initiative enacted during the Obama administration.
Individuals convicted of a drug-related felony are currently ineligible for the Supplemental Nutrition Assistance Program (SNAP), unless a state has chosen to eliminate or modify the restriction (currently, all but seven states have done so). The American Families Plan would eliminate this barrier.
Child Care ReformChild care is a necessity for working parents, but one that is often a significant financial burden. More than half of families report spending at least $10,000 per year on child care, according to a 2020 study by Care.com. The American Families Plan would make child care affordable for families in need of it the most, expand access to services and invest in child care workers.
The plan would cap the cost of low and middle-income families to no more than 7% of their income on “high-quality child care,” granting an estimated $14,800 in savings per year on child care expenses. Families eligible for the assistance would be those earning 1.5 times their state median income.
Child care centers would also be provided with funding to improve their services and pay their workers more. The plan provides funding “to cover the true cost of quality early childhood care and education,” such as appropriate curriculum, smaller class sizes and environments that are inclusive for children with disabilities. Early childhood staff will receive a $15 minimum wage and training or coaching for professional development.
Unemployment Insurance ReformThe American Families Plan would automatically adjust the length and amount of unemployment insurance benefits workers can receive, depending on economic conditions. A fact sheet from the White House gives little specifics on this provision, but appears to give flexibility to Congress for it to easily adjust the length and amount of benefits in times of economic crises.
Will the American Families Plan Become Law?Biden’s proposal is wide-reaching and includes provisions supported by a vast swath of the Democratic party—but it’s already unclear just how much support the actual proposal will receive, or what it might look like if it becomes law.
Progressive Democrats have called on Biden to go further, such as making the CTC expansion permanent instead of only running it through 2025, or providing double the funding for expanded child care. PunchBowl News, run by veteran Capitol Hill reporters, believe “zero” Republicans will vote for the plan, especially since it includes tax increases. There’s also the large price tag that will likely make Republicans wary, especially during a period of economic recovery.
Biden could pass the plan through the budget reconciliation process, meaning it would only require a simple majority vote in the Senate, as he did with ARPA in March. Special approval by the Senate parliamentarian that the proposal is eligible to be passed under the budget reconciliation process would be needed. The legislation still needs to be drafted and negotiated by the House. |
